According to a new report from Greenwich Associates, Global Banks are More Selective with Large Corporates, it’s a buyers’ market for credit and companies are spreading their business to ensure adequate and reliable sources of credit and other essential bank services. This is working against banks’ efforts to be more selective, the report says.
In corporate lending, the report finds, most large banks are focusing their efforts and capital on companies in which they are one of the lead relationships to capture a substantial “share of wallet” across all bank products and ensure adequate levels of profitability. Many foreign or regional banks focus their strategies on being among the Top 5 banks that are within the inner circle &mdash a strategy that does not require as much capital, yet still delivers good returns on a multi-product basis.
This dynamic extends to cash management and other business lines as well.
“The reality is, in today’s marketplace you have to be important to a bank to qualify for full service,” says Greenwich Associates consultant John Colon. “And importance is measured in revenue and share of wallet.”
2014 Greenwich Leaders in Large Corporate Banking
Regardless of any shifts in strategy, Bank of America Merrill Lynch and J.P. Morgan continue to dominate the world of U.S. large corporate banking. Approximately 84% of large U.S. companies do business with one or both of these banks. Wells Fargo is a solid third, with a market penetration of 70%, followed by Citi at 63%. These firms are the 2014 Greenwich Share Leaders in U.S. Large Corporate Banking.
HSBC, RBS and Barclays have all significantly increased their presence as credit providers to large U.S. corporates over the past three to five years. In fact, this trend isn’t limited to these leading foreign banks. Other banks such as Bank of Tokyo Mitsubishi, BNP Paribas and RBC have also added meaningful numbers of lending clients in the U.S. “These banks are benefitting from the growing demand among U.S. companies for international banking capabilities,” says Greenwich Associates consultant Andrew Grant.
The 2014 Greenwich Quality Leaders in U.S. Large Corporate Banking are Bank of America Merrill Lynch and J.P. Morgan.
2014 Greenwich Leaders in Cash Management
As in overall large corporate banking, Bank of America Merrill Lynch and J.P. Morgan are the leaders in U.S. Large Corporate Cash Management, with roughly two-thirds of U.S. companies using one or both banks as a provider. Again, Wells Fargo is third with a market penetration score of 52%. These banks are the 2014 Greenwich Share Leaders in U.S. Large Corporate Cash Management. Bank of America Merrill Lynch, J.P. Morgan, PNC Bank, US Bank, and Wells Fargo all share the title of 2014 Greenwich Quality Leaders in the category.
“What’s interesting in this business today is that you now have five top-notch cash management providers with similar levels of quality at the top end of the market,” says Greenwich Associates consultant Don Raftery. “But it might not seem that way to corporate clients. Because banks are being so aggressive in tiering companies and allocating resources to their best clients, different companies might have much different perceptions about the quality of service delivered by the same bank. In addition, each bank has a particular area where they deliver distinctive quality. For some it is international payments, with others it is domestic customer service.”
2014 Greenwich Leaders in Debt Capital Markets
Building off their powerful franchises in corporate banking and lending, J.P. Morgan and Bank of America Merrill Lynch have built dominant franchises in debt capital markets. J.P. Morgan leads all competitors with a market share of 69%, with Bank of America Merrill Lynch close behind at 66%. Citi is third at 42%. These banks are the 2014 Greenwich Share Leaders in U.S. Debt Capital Markets. J.P. Morgan is the 2014 Greenwich Quality Leader in U.S. Debt Capital Markets.