Greenwich Associates study shows top banks could be ready to fight for your business.
The bank sector has been buffeted by the events of the financial crisis and then by a flurry of regulations in the aftermath. This has made dealing with them a little tricky for corporate treasurers. But a new survey from Greenwich Associates shows that a fight for market share could be brewing among top banks, which could mean better terms for treasurers.
According to results from Greenwich’s 2010 US Large Corporate Banking Study, Bank of America Merrill Lynch, J.P. Morgan, and Citi and Wells Fargo continue to dominate the corporate services market. Currently, 87 percent of Fortune 500 companies do business with Bank of America Merrill Lynch, 80 percent use J.P. Morgan, and about two-thirds each use Citi and Wells Fargo, Greenwich said.
But it’s not necessarily good news for these banks. That’s because even as they have seen an overall increase in the number of clients, banks also have seen a corresponding decline in revenue. That’s likely because treasurers are doing a lot of shopping. According to a Treasury Strategies survey (see related story here), there’s been an uptick in the number of corporates changing the number of banks with which they do business. Among large corporates, according to the survey, some 50 percent have indicated that they changed the number of treasury management service providers in 2009, with slightly more increasing the number than decreasing them.
This suggests that with all the switching and consolidating, there has not been an increase in spending by treasurers. This turmoil is also reflected in the Greenwich data, which suggests the sector may be on the “verge of a market-share war within the Fortune 500 client segment.”
“The fact that the banks are generating fewer revenues in this business due to tepid demand from these large borrowers is prompting some banks to get more aggressive in rates and terms,” Greenwich reports.
While it’s probably never a good idea to play coy with relationship banks, these findings do show that treasury has leverage when it comes to finding the right bank.