Australia’s Top 500 Corporates are beginning to tire of efforts by their bankers to cross-sell new products as the market begins a period of consolidation, according to a new report from research house East and Partners.
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:
-
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. -
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. -
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