Cash management poll 2003: Corporates push their banks hard

COPYING AND DISTRIBUTING ARE PROHIBITED WITHOUT PERMISSION OF THE PUBLISHER: CHUNT@EUROMONEY.COM

By:
Denise Bedell
Published on:

Go to full results         Methodology

THE CASH MANAGEMENT game is all about cut-throat competition. Several major global banks now have a presence in the same countries, offering similar services and using similar technology, so it is no easy task for any of the big players to win, or keep, a corporate's favour. And with non-bank providers pushing in on all parts of the traditional cash management business, regional and global cash management banks have their work cut out for them in holding on to market share.

Wise investment is the name of the game, and winning lucrative transaction business continues to be the great driver for most of the top-tier banks' expenditure since no other business can hope to provide the same returns. But competition for that business is stiff. To win and keep the transaction custom from big corporate names, cash management banks must offer a full range of complementary services, must continue to develop and implement top-tier technology, and provide it all at reasonable prices.

In addition to ever-increasing competition for traditional products, banks also face ever-changing demands from corporates themselves. After extensive spend on new developments throughout the late 1990s and into 2000, with the bursting of the internet bubble banks confronted corporates no longer willing to throw money at new developments and not interested in any but the most plain vanilla of cash management products.

Then there came such world-shaking events as Enron and the many corporate scandals that followed. This led, among other controls, to the Sarbanes-Oxley legislation on corporate accounting disclosure in the US. Events such as these changed the market completely.

Economic dampener

Another big driver of change in the cash management marketplace is the economic downturn and its continued global effects. Consultancy firm Treasury Strategies, in its 2003 corporate treasury survey, cites the sluggish economy as the single-largest factor to influence corporate treasurers' ordering of priorities over the past year.

One of the many impacts of this was an increasing inward focus for corporates. Companies now want to have greater control of their processes and understand the flows of the business on a much deeper level. Richard Challinor, senior vice-president of global cash management sales at Bank of America, explains: "Sarbanes Oxley has probably had the biggest impact on our market, and that of course revolves around control. It adds a dimension to the scope of any particular corporate project, as that control element is always on the table."

Alan Verschoyle-King, head of corporate cash management EMEA at ABN Amro, says many corporates have viewed the business environment of the past few years as being one of permanent crisis. This has led to a change in focus across the market: "The key themes emerging from this environment for our clients have been greater cost-consciousness; improved transparency and simplicity in business processes; the integration of systems, processes and financial structures; and an increased focus on compliance-related issues."

All of this has created a global corporate base that is much more gun-shy about new projects. "Companies now put a lot of time into researching projects," says Paul Galant, global head of cash management at Citigroup. "They have to understand the return on investment before putting any money into it. They want to know the time and cost for implementation, what the risks are, how enduring the system or solution is likely to be, and what are the alternatives."

Peter Hazou, regional head of European cash management at HSBC, says: "Corporate clients have become much more focused on control of both liquidity and information. Their demands on banks have become both simpler and more difficult to provide." Corporates want uncomplicated solutions to complicated problems, and banks must have the technology and knowledge base to provide these with little disruption to the organization. If a bank cannot promise the goods, corporates can, and will, look elsewhere.

A corporate treasurer at a French multinational explains: "We now look at our overlay banks every three or four years, and we send out RFPs [requests for proposals] for our domestic bank business every three years on a rotational basis. We are always looking at who can provide us with the best solutions, and we are always looking to drive down costs."

And aside from requiring best-of-breed solutions, credit remains ever-important. Even many of the corporates at the top of the tree have felt some squeeze from the credit crunch. Basle II promises even more of the same for banks, so they must increasingly manage the balance sheet with an eye on all parts of the business - and all types of opportunities to cross-sell to wholesale clients. And corporates more often than not demand credit before they will contemplate using banks for any additional business.

The French corporate treasurer says: "We will not even consider services from banks that are not involved in our credit facilities - regardless of how good their technology may be. We send out RFPs first and foremost to our relationship banks and only if they all fail to provide reasonable options will we consider looking elsewhere."

But given the number of banks generally providing credit to the average blue chip, how can banks differentiate themselves? According to Frank Heerens, group treasurer at NEC Computers International, it is through service, reliability and pricing. "If I put in a transfer order I expect it will be submitted with 99.99% reliability. I want my cash management banks to provide quick processing and offer a range of services. I also, of course, expect them to keep up with technological advances and to be at least competitive in the realm of technology. But most important is service provision and reliability."

Streamlining dealings

Corporates also want to deal with one single global contact for all their business dealings with a particular bank. That is one demand that banks have been listening to. In the past two years there have been significant shifts in the way that the sales forces are structured at a number of global banks, for example Citigroup.

It is no longer enough just to handle cash management and be top-tier in payments, so banks are now inserting themselves all along the financial supply chain. For example, in receivables business banks can act as the financial linkage between a multinational corporate and its suppliers and trade partners. This reduces risk for a corporate by speeding its ability to sell and distribute goods, as well as be supplied.

The more pieces of the puzzle that a bank can bring together for a client, the greater the competitive advantage when it comes to winning additional business. Challinor at Bank of America explains what this means for the banks. "Now you need to think along the whole financial supply chain," he says. "You are not just working with treasury but also with accounts payable and accounts receivable, shared service centres and so on, which is a much broader remit." This also means access to more contacts at a given company and theoretically more chances to sell.

Verschoyle-King at ABN Amro sees it as critical for the bank. He says: "The key focus areas for ABN Amro over the past few years have been, from a product perspective, the increased provision of integrated working capital solutions to clients and, from a relationship perspective, a greatly increased focus on our key corporate names."

Liquidity management is also increasingly a focus for corporates. This is a mixed blessing for the banks. If they can attract the business, it gives them not only the opportunity to provide regional or global solutions but also gives them much better access to their corporate clients. However, it is not the most lucrative business.

Fritz Philipps, head of corporate cash management sales Germany and Switzerland at Deutsche Bank, says: "Although it does not give margins like the transactional business, liquidity management is very important in terms of visibility. We could close a deal for a big corporate in receivables in Spain and it would be less of a splash than closing a euro cash concentration deal, even though the revenue would be much smaller.

"In addition, acting as an overlay bank always provides an advantage from an information perspective. You speak to your customer much more often having an overlay relationship and know much more about their business and their needs than if you only have local contact."

Although all of the major global and regional banks are building their presence in providing working capital management solutions and services, and many are making significant inroads despite competition from other banks and non-financial providers, none has yet presented a challenge to Citigroup in its domination of the Euromoney Cash Management Poll.

Galant sees Citigroup's greatest strength in its oft-touted global presence, and a strategy of setting up branches locally, rather than taking the partner-bank approach: "It is all about accountability, being there in good times and bad. With a partner-bank approach, if someone has an affiliate which is providing services to their client and the affiliate changes their mind about the service or the terms, there is no recourse, and generally the client suffers on some level." By contrast, he says: "I cannot give a client an excuse if something falls through. I am accountable and will take responsibility."

However, such a broad-ranging strategy does come at a rather high price. As much as the group hinges its brand on the local branch approach, it still has some weaknesses, including its north American and western European presence. But Galant says that will change: "We are growing in those areas organically and plan to grow through acquisition."

Catching up with Citi

Although Citi is still the undisputed leader in cash management, the poll results indicate that it is losing ground against strong competition in areas once seen as its forte.

Deutsche Bank and JPMorgan Chase are leading the way, according to respondents, in effective use of new technology, and the two are considered to be the best suppliers of services in many parts of the foundational transactions business.

Another big change seen in the poll is that HSBC has finally made the leap over Deutsche Bank to take second place in the overall standing, up from third place for the past two years. ABN Amro also made a leap to third place - leaving Deutsche Bank two places down on last year, in fourth spot.

All in all, it was a year of change for corporates and for the banks that serve them. Once again it was characterized by earth-shaking events.

Corporates looked internally to shore up systems, create more efficiencies and increase automation. And cash management banks looked outside their usual borders to build out product lines and integrate existing solutions to provide full-service, holistic solutions for their existing and potential clients.

Cash Management Poll 2003
Which ICMs do you currently use for your operations in the following regions?
Globally
03 02 Bank Weighted score
1 1 Citigroup 2143
2 3 HSBC 1825
3 4 ABN Amro 1115
4 5 Bank of America 966
5 2 Deutsche Bank 790
6 7 Standard Chartered 551
7 6 JPMorgan Chase 527
8 8 ING Group 306
9 21= SEB 269
10 9 BNP Paribas 255
11 11 Société Générale 217
12 14 Commerzbank 166
13 13 Nordea 120
14 18 Crédit Lyonnais 111
15 15 RBS 92
16 10 Barclays 84
17 17 Wachovia First Union 73
18 16 FleetBoston 66
19 - Raiffeisen Zentralbank (RZB) 55
20= 24 Danske Bank 53
20= 21= Dresdner 53
22 23 Bank of Tokyo Mitsubishi 41
23 31 ANZ Bank 39
24 19 Sumitomo Bank 35
25 12 Bank One 33
26 26 Mellon 28
27 27= Development Bank of Singapore 18
28= 25 Bank of New York 15
28= 30 BBVA 15
30 - SCH 14
Western Europe
03 02 Bank Weighted score
1 3 ABN Amro 6
2 2 Citigroup 418
3 5 HSBC 394
4 1 Deutsche Bank 3
5 4 Bank of America 205
6 15 SEB 187
7 6 JPMorgan Chase 179
8 7 BNP Paribas 155
9 11 Société Générale 134
10 12 Commerzbank 133
11 10 RBS 92
12 9 ING Group 82
13 8 Barclays 76
14 13 Nordea 57
15= 16 Dresdner
15= 17 Danske Bank
Emerging Europe
03 02 Bank Weighted score
1 1 Citigroup 314
2 3 ING Group 168
3 4 Deutsche Bank 104
4 2 ABN Amro 103
5 5 HSBC 83
6 9 Bank of America 75
7 - Raiffeisen Zentralbank (RZB) 55
8 11 Commerzbank 24
9 13 Crédit Lyonnais 23
10= 12 Société Générale 22
10= 14 Standard Chartered 22
10= - SEB 22
13 8 Nordea 21
14 - BNP Paribas 11
15 7 HVB Group 9
North America
03 02 Bank Weighted score
1 2 Bank of America 304
2 1 Citigroup 276
3 3 JPMorgan Chase 158
4 7 HSBC 100
5 8 ABN Amro 91
6 6 Deutsche Bank 42
7 5 Wachovia First Union 38
8 - SEB 36
9 10 Mellon 28
10 4 Bank One 21
11 - Crédit Lyonnais 16
12 - ING Group 14
13 13 Nordea 12
14 - Standard Chartered 11
15 - BNP Paribas 10
Latin America
03 02 Bank Weighted score
1 1 Citigroup 270
2 4 ABN Amro 154
3 3 HSBC 79
4 2 FleetBoston 58
5 - Wachovia First Union 26
6 8 Bank of America 21
7= - Crédit Lyonnais 16
7= - Standard Chartered 16
9= - SCH 14
9= - ING Group 14
11 7 BBVA 12
12 - BNP Paribas 9
13= - Société Générale 6
13= - Bank of New York 6
15= 6 JPMorgan Chase 4
15= 5 Deutsche Bank 4
Middle East
03 02 Bank Weighted score
1 - HSBC 260
2 - Citigroup 158
3 - Standard Chartered 87
4 - ABN Amro 63
5 - BNP Paribas 36
6 - Société Générale 16
7 - Deutsche Bank 10
8 - JPMorgan Chase 6
9 - ANZ Bank 3
10 - Barclays 2
Africa
03 02 Bank Weighted score
1 - Citigroup 90
2 - Standard Chartered 43
3 - HSBC 28
4 - ABN Amro 26
5= - ANZ Bank 4
5= - Deutsche Bank 4
7 - Barclays 3
Asia
03 02 Bank Weighted score
1 2 HSBC 728
2 1 Citigroup 336
3 4 Standard Chartered 322
4 3 Deutsche Bank 190
5 5 Bank of America 183
6 7 ABN Amro 114
7 6 JPMorgan Chase 46
8= 9 Bank of Tokyo Mitsubishi 35
8= 8 Sumitomo Bank 35
10 10 Development Bank of Singapore 18
11 - Crédit Lyonnais 16
12 11 ANZ Bank 14
13 - ING Group 12
14 - BNP Paribas 7
15 - SEB 6
Multiregional
03 02 Bank Weighted score
1 1 Citigroup 281
2 4 Bank of America 178
3 6 HSBC 153
4 5 JPMorgan Chase 128
5 2 ABN Amro 108
6 3 Deutsche Bank 86
7 - Société Générale 39
8 - Nordea 30
9 9 BNP Paribas 27
10 7 Standard Chartered 21
11 - SEB 18
12 8 ING Group 16
13 - ANZ Bank 15
14 - Commerzbank 9
15= - Bank of New York 3
15= - Bank of Tokyo Mitsubishi 3
15= - Bank One 3
Which ICMs do you rate as the
best in the following regions?
Globally
03 02 Bank Weighted score
1 1 Citigroup 2485
2 5 HSBC 1793
3 3 ABN Amro 1096
4 2 Deutsche Bank 1014
5 6 Bank of America 897
6 7 Standard Chartered 578
7 4 JPMorgan Chase 464
8 8 ING Group 401
9 9 BNP Paribas 214
10 22 SEB 201
11 10 Société Générale 124
12 15 Nordea 97
13 13 FleetBoston 62
14 25= Crédit Lyonnais 59
15= 17= Wachovia First Union 52
15= 17= Mellon 52
Western Europe
03 02 Bank Weighted score
1 2 Citigroup 568
2 1 Deutsche Bank 517
3 3 ABN Amro 475
4 6 HSBC 355
5 5 Bank of America 203
6 4 JPMorgan Chase 163
7 13 SEB 156
8 7 BNP Paribas 1
9 8 ING Group 131
10 10 Société Générale 90
11 11 RBS 47
12 12 Commerzbank 44
13 14 Nordea 42
14 9 Barclays 34
15 17= Standard Chartered 23
Emerging Europe
03 02 Bank Weighted score
1 1 Citigroup 309
2 3= ING Group 193
3 2 ABN Amro 121
4 3= Deutsche Bank 107
5 6 HSBC 87
6 7 Bank of America 60
7 - Standard Chartered 24
8 - SEB 23
9= 9 Nordea 20
9= - BNP Paribas 20
11 10 Société Générale 16
12 - Crédit Lyonnais 8
13 - Raiffeisen Zentralbank (RZB) 5
14 - Danske Bank 4
15 5 JPMorgan Chase 2
Africa
03 02 Bank Weighted score
1 - Citigroup 100
2 - Standard Chartered 41
3= - HSBC 24
3= - ABN Amro 24
5 - Dresdner 4
North America
03 02 Bank Weighted score
1 1 Citigroup 314
2 2 Bank of America 261
3 3 JPMorgan Chase 141
4 7= HSBC 94
5 10 ABN Amro 77
6 5= Mellon 52
7 7= Deutsche Bank 46
8 4 Bank One 44
9 5= Wachovia First Union 20
10 - Crédit Lyonnais 16
11 - ING Group 14
12 9 Bank of New York 12
13 - Standard Chartered 11
14 11 FleetBoston 9
15= 12= Nordea 8
15= - SEB 8
Latin America
03 02 Bank Weighted score
1 1 Citigroup 268
2 3 ABN Amro 144
3 2 HSBC 75
4 4 FleetBoston 53
5 7 Bank of America 23
6 - Wachovia First Union 20
7 6 JPMorgan Chase 19
8 - Crédit Lyonnais 16
9 - ING Group 12
10 - Standard Chartered 11
11 - SCH 9
12= 5 Deutsche Bank 4
12= - Société Générale 4
Middle East
03 02 Bank Weighted score
1 - HSBC 246
2 - Citigroup 144
3 - Standard Chartered 90
4 - ABN Amro 55
5 - Deutsche Bank 10
6 - BNP Paribas 9
7 - Bank of New York 6
8 - ANZ Bank 3
9= - Barclays 2
9= - RBS 2
Asia
03 02 Bank Weighted score
1 2 HSBC 747
2 1 Citigroup 416
3 4 Standard Chartered 334
4 3 Deutsche Bank 203
5 6 Bank of America 144
6 5 ABN Amro 107
7 7 JPMorgan Chase 37
8 8 Sumitomo Bank 19
9= - ING Group 16
9= - Danske Bank 16
11 9 Bank of Tokyo Mitsubishi 15
12 11 ANZ Bank 9
13 - BNP Paribas 7
14= 10 Development Bank of Singapore 6
14= - SEB 6
Multiregional
03 02 Bank Weighted score
1 1 Citigroup 366
2 5 Bank of America 206
3 6 HSBC 165
4 2 Deutsche Bank 127
5 4 JPMorgan Chase 102
6 3 ABN Amro 93
7 7 Standard Chartered 44
8 8 ING Group 35
9 - Nordea 27
10 - BNP Paribas 23
11 - Société Générale 14
12 - SEB 8
13 - Bank of New York 3
14= - Barclays 2
14= - Commerzbank 2
How do their own customers rate them?
Proportion of voters who rate their lead ICM
as either very good or excellent
Global coverage and delivery
03 02 Bank Score
1 3 Standard Chartered 85.71%
2 2 HSBC 82.20%
3 1 Deutsche Bank 81.25%
4 5 Citigroup 80.68%
5 4 JPMorgan Chase 77.78%
6 - Société Générale 73.33%
7 8 ABN Amro 71.95%
8 - Barclays 62.%
9 6 Bank of America 51.79%
10 7 BNP Paribas .00%
Strength of relationship with bank
03 02 Bank Score
1 - Barclays 87.%
2= - Commerzbank 85.71%
2= 9 Standard Chartered 85.71%
4 8 Nordea 81.82%
5 1 JPMorgan Chase 80.00%
6 5 Citigroup 79.55%
7 4 HSBC 75.40%
8 3 Deutsche Bank 73.75%
9 - SEB 73.08%
10 2 BNP Paribas 71.43%
Level of commitment to your
cash management business
03 02 Bank Score
1 4 JPMorgan Chase 88.89%
2 - Barclays 87.%
3= 9 ING Group 83.33%
3= - Commerzbank 83.33%
5 5= Nordea 81.82%
6 - SEB 81.48%
7 3 Deutsche Bank 75.00%
8 5= Citigroup 72.73%
9 2 HSBC 71.84%
10 8 Standard Chartered 66.67%
Industry expertise & knowledge
03 02 Bank Score
1 1 Standard Chartered 85.71%
2 5 JPMorgan Chase 77.78%
3 2 Deutsche Bank 76.25%
4 4 HSBC 73.79%
5 10 Nordea 72.73%
6 3 Citigroup 71.59%
7 - SEB 66.67%
8 - Barclays 62.%
9 8 ABN Amro 57.32%
10 - Société Générale 56.25%
Quality of personnel
03 02 Bank Score
1 2 Deutsche Bank 83.75%
2 1 Standard Chartered 80.95%
3 5 HSBC 79.29% %0
ING Group 83.33% 3= - Commerzbank 83.33% 5 5= Nordea 81.82% 6 - SEB 81.48% 7 3 Deutsche Bank 75.00% 8 5= Citigroup 72.73% 9 2 HSBC 71.84% 10 8 Standard Chartered 66.67% Industry expertise & knowledge 03 02 Bank Score 1 1 Standard Chartered 85.71% 2 5 JPMorgan Chase 77.78% 3 2 Deutsche Bank 76.25% 4 4 HSBC 73.79% 5 10 Nordea 72.73% 6 3 Citigroup 71.59% 7 - SEB 66.67% 8 - Barclays 62.% 9 8 ABN Amro 57.32% 10 - Société Générale 56.25% Quality of personnel 03 02 Bank Score 1 2 Deutsche Bank 83.75% 2 1 Standard Chartered 80.95% 3 5 HSBC 79.29% %0