(Australia) – Continuing hyper-competitive market conditions in the Australian corporate banking markets are encouraging large customers to entertain both relationship banking changes and moves in product specific service providers at the same time as developing more aggressive styles in doing business with their bankers.
In
positioning their banking relationships, CFOs, Treasurers and Boards have
historically viewed their primary banking relationship as existing with
the bank to which they had greatest debt exposure. This, during much of
the 90’s changed to be the banker delivering Corporate Advisory support –
the bringer of deals and equity. The circle continues to turn further and
is inexorably reverting to the corporate’s core Transaction Banker (TB).
Just as the banks are continuously looking to build value and margin into
their relationships, the corporate is chasing something unique that
differentiates a bank from its competitors in ways which connect with that
corporate’s needs.
This is
causing significant account churn in the market as banks present new
relationship propositions, win business off competitors and look to deepen
their existing customer engagements. In Transaction Banking, the often
maltreated poor cousin within a full service bank, the barriers to change
can be substantial – we see this in the lag times for example between
deteriorating Customer Satisfaction performance and falling market share
for a particular service provider – anywhere from 9 to12 months.
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Big
differences exist between these primary relationship positions and
secondary Transaction Banking relationships (38.0% of Top 500 corporates
have more than one Transaction Banker), with substantially improved
penetration at this level being achieved by other than the Big 4 domestic
banks. Indeed this level of secondary TB engagement is growing smartly (a
significant 6.7% over the past 6 months) and is one of the key routes into
a new corporate account for service providers. Although a relatively
closed TB marketplace with 85.3% of primary relationships still held by
the Big 4, substantial account change is occurring both within the Big 4
and corporates moving in whole or part across to the internationals.
This is not
the situation in the Top 500 corporate banking (Equity, Debt, Treasury and
Advisory) markets where primary relationship share, although still
dominated by the Big 4 (52.0% – a relative drop of 2.1% over the previous
6 months), is considerably more distributed and penetrated by the
international investment banks and niche players. Both these latter groups
have traditionally employed a "Trojan Horse" strategy in
building business – use a product area where real expertise can be
demonstrated to start a relationship and look to lever further product
business from this. The approach has been only partly successful as CFOs
and Treasurers have become more astute and aggressive at the same time in
how they have looked to engage banks. The result, however, has been an
extremely competitive landscape where real value, relative to other global
markets, is being delivered to the customer.
Some key
conclusions are clear…
-
Corporates
are increasing the engagement of all products from their bankers; the only
product lines experiencing a reduction in use over the past 6 months are
Government Bonds, Corporate Bonds, Short Term FX Debt and Project
Financing.
-
The market
is increasing its use of secondary bank relationships in most product
areas – a real measure of just how competitive this environment is
becoming; the exceptions where secondary banker engagement is falling are,
interestingly, in Corporate Advisory, M&A and Capital Structuring
which are very relationship driven and Domestic e-Banking and Payments
Processing where the transaction infrastructure often necessitates single
service provider arrangements.
-
Both these
trends are accompanied by small but consistent increases in the share of
business being secured by the primary banker in each product line.
Exceptions here are Trade Finance, Project Financing, Spot FX, Equity
Raising and Domestic e-Banking.
East & Partners Pty Ltd
Australian Corporate Banking Markets – Account Penetration Service
June 2002