Australian Corporate Banking Starts Consolidation
East has just completed its 22nd six-monthly Account Penetration and Market Share research program, which measures market share across all core corporate banking products for both primary and secondary relationships.
East achieved a participation rate of better than 90 percent, with 451 of Australia's Top 500 contributing to this program round.
The survey shows that despite a strong focus from the banks to increase their cross-sell ratios and get their clients to engage more products, customers are starting to plateau in their uplift.
In particular, there is a strong trend for customers to reduce their level of engagement with their secondary bankers in several key areas.
Of eighteen product areas for which results were recorded (nine were panel banked), only two showed an increased level of engagement in these secondary relationships.
The survey, taken from interviews with the chief financial officers or equivalents at Australia's Top 500 Corporates in December 2002, shows a 67.6 percent drop in the number of company's using secondary bankers for Long Term FX Debt, and a 78.0 percent fall in secondary engagements in Equity Raising.
Correspondingly, there was a small but consistent increase in the share of business being secured by the primary banker in each product line, suggesting that real consolidation is beginning in the market.
This is of particular importance to the banks because these secondary relationships - particularly in the corporate banking area - have been a 'Trojan Horse' in terms of building business.
Banks have used product areas where they have particular expertise as a way of starting relationships, and looking to leverage further product business from this.
The survey also shows:
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that Westpac and NAB's share of principal transaction banking relationships continue to fall, while the ANZ and the CBA continue to gain ground. Westpac, although still number one, has seen its market share fall from 28.9 percent of the Top 500 in June 2002 to 27.7 percent in December. Second-placed ANZ has gone from 25.7 percent to 26.2 percent over the same period, while the CBA has moved from 16.4 percent to 17.3 percent. NAB is in fourth place, and has fallen from 14.3 percent to 13.7 percent. Fifth ranked St George has stabilised recent gains at around 4.0 percent.
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although secondary banker engagement is slipping, the Top 500 are increasingly using secondary providers in their core transaction banking. 43.7 percent of corporates surveyed now have more than one transaction banker, up from 38.0 percent in the previous survey. This is significant because customers are increasingly viewing transaction banking as their most important banking relationship, and is one of the key routes into forming new corporate banking relationships.
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the Big Four's share of corporate banking relationships remained stable at 52.0 percent over the two surveys six months apart. Once again, Westpac remained the leader but its market share slipped - from 15.2 percent in June 2002 to 14.4 percent in December. CBA, ranked third in this category, was the only one of the Big Four to increase its market share, moving from 10.6 percent to 11.1 percent. The corporate banking area is one populated with local and international investment banks and of these the biggest mover was Macquarie Bank, which is now ranked equal fifth with UBS Warburg after its market share moved up from 4.1 percent to 5.5 percent. Citibank and CS First Boston were notable for losing market share over the two surveys in terms of primary corporate banker relationships.
Releasing the report, East and Partner's principal analyst Paul Dowling said the survey had confirmed results from previous rounds, which had predicted the market consolidation now in evidence.
'In an increasingly competitive marketplace, banks are committing substantial sums to marketing and promoting their capability with corporates in both public and private channels,' he said.
'The survey shows that despite these efforts, the increasing sophistication of the customers means that they are more likely to make their own decisions on what products to use, rather than be guided by their bankers.'
'The Top 500 seem to have entered a period of product indigestion, and that is just going to make the market even more competitive.'
For more information contact:
Lachlan
Colquhoun
Client Consultant and Executive Editor
East and Partners
Ph: 61-2-9004 7855
lachlan.c@eastandpartners.com