Transaction services guide 2014: Relationship banking – a treasurer’s view
For heating and plumbing products distributor Wolseley, transaction banking – rather than one-off mandates – is the foundation of its banking relationships.
“I see banking as the original outsourcing and logistics service, acting as a store of wealth and a way to facilitate its transfer,” says Mike Verrier, group treasurer of Wolseley. “Consequently, we treat our banks as we would any other supplier or service provider. We need banking partners that can meet our needs over the long term and with whom we can have a mutually profitable relationship.”
Wolseley’s extensive branch network means that it needs local banks in the countries where it operates. These banks form the core of its banking group. Wolseley currently has 21 relationship banks, which provide it with the product range and geographic spread it needs.
“Whenever we plan a major transaction, such as a revolving credit facility, a US private placement or a receivables financing facility, we know that some combination of our relationship banks will be able to provide excellent execution,” explains Verrier.
“Naturally, we look at the various league tables for transactions and generally we find that at least five of our relationship banks are in the top 10. The great benefit of such a strong banking group is that we know we can complete any transaction we contemplate with a bank we know well and we have worked with in the past. When you are doing a complex transaction, working with teams you know well is a distinct advantage.”
Wolseley has always been open about the quid pro quo that in return for focusing the great majority of its ancillary business with its core banks, these banks must lend to the company, with loan margins that reflect the value of total business.
|Mike Verrier, group
treasurer of Wolseley
“We expect attractive loan margins because of the other business that the banks will obtain from us,” says Verrier. “Since the financial crisis, banks have become increasingly willing to talk about ‘share of wallet’ and how they value the business we do with them.”
Nevertheless, it remains hard to get some banks to tell Wolseley what business they want to win. “The leading banks are clear about their capabilities – they focus on their competitive products and services; these banks are a pleasure to work with as we can channel our efforts into working with them in activities where we maximize the benefits for both of us,” says Verrier.
“Alas, a large number of banks still apply a scattergun approach, trying to offer everything, but not being clear where they really excel. It is much harder to develop relationships with these banks as we struggle to find the key areas to focus on.”
Verrier encourages banks to present new ideas that might benefit the company. “We are always willing for banks to trial and test ideas with us even while they are still in development; we see it as a privilege to be able to contribute to the development of new products and services in this way,” he says.
He cites supply-chain finance and FX risk management as “excellent’ products” it was introduced to in this way. Unfortunately, Verrier also sees numerous “solutions looking for problems”, which he believes would be less common if banks spent more time talking to clients during product development.