Greenwich Associates survey names top corporate banks; shows banks will compete for best clients.
Since the financial crisis began many companies have been decreasing the number of relationship banks. But at the same time, they haven’t increased spending with those fewer banks. And in its latest Quality and Share Leaders survey, Greenwich Associates reports that as a result, banks will try even harder to win the business of the best clients.
According to its 2011 survey, Bank of America Merrill Lynch and J.P. Morgan remain the dominant corporate banks in the US. Each was used by 83-84 percent of large U.S. companies. Citi was third in the ranking, with 62 percent penetration.
But Greenwich said that going forward, all these banks are going to have to compete hard for business. That’s because, pinched by new capital requirements that will force them to pull back on resources to their lesser clients, they will as a result all be aggressively targeting the wallets of just the top companies.
“[E]ven as increased capital reserve requirements cause banks to consider reducing the amount of resources they devote to their least profitable corporate clients,” said Greenwich Associates consultant John Colon in a statement, “there will be a footrace among the three market leaders to land one of the one or two core banking spots with companies having significant profit potential.”
It will be incumbent upon corporate treasurers then to make sure they are in the “top company” category when it comes to their banks. This means first and foremost knowing the perspective of your bank relationships – getting a good picture of what drives the relationship from their perspective. In doing so, it’s good to find out whether it has committees that determine allocations or deal prioritizations.
From the corporate perspective, this also means knowing where the company stands with each of its bank’s strategic client list – is the company on it? Another question to ask is whether the company has been feeding your bank regularly. Nowadays banks like a steady diet vs. occasional feasts followed by periods of famine (see related story here).
Meanwhile, in terms of pressure on banks, the European debt crisis has been forcing their hands when it comes to raising capital to meet Basel III capital requirements (see related story here). Also, the Fed has said recently that it require the largest US banks with $50 billion or more in assets to take concrete measures to increase capital during the phase-in of Basel III. Despite its talk that banks won’t be forced to raise capital early, the Fed “intends to ensure that firms are on a steady path to full Basel III compliance.”