America’s chief financial officers have decidedly mixed feelings about the rise of financial supermarkets.
Almost 70 percent of the CFOs responding to Institutional Investor‘s survey this month have been approached by banks offering so-called one-stop shopping. In concept, these megabanks promise to provide clients with everything from loans to asset management services. Only 10.6 percent of those polled like the idea; 57.4 percent do not, and the rest want to wait and see.
Of those who are fans, 62.5 percent say the ease of receiving a variety of services appeals to them, with 50 percent saying they like having fewer bankers to deal with. Of those who do not approve, a majority are concerned that lessened competition may ultimately lead to higher transaction costs, while 27.6 percent prefer to hire specialists.
Among the respondents, 55.6 percent say they would be willing to use their primary bank lenders for merger advice. Only 18.8 percent of them, however, have actually done so. On the other hand, 81.8 percent of CFOs say they have used their primary investment banks for loan syndication services.
Only 36.7 percent of CFOs think financial services consolidation will benefit their companies. Almost two thirds say it’s unclear whether the repeal of the Glass-Steagall Act -- which made the financial supermarket possible -- is good or bad. But of the 22.4 percent of those who think the repeal has been good, 50 percent think it will increase competition for their companies’ business. Of the 12.2 percent who think the repeal was a mistake, 77.8 percent feel it concentrates too much power and more than 55 percent say it increases the danger of a large financial collapse.
It would appear that the banks still have some marketing work to do.
Has your company been approached by commercial or investment banks pitching one-stop shopping?
Yes 69.4%
No 30.6
Overall, do you like the concept?
Yes 10.6%
No 57.4
Want to wait and see 31.9
If you do like the concept, why? (Check all that apply.)
Offers more unified approach to financing strategies 62.5%
Fewer bankers to deal with 50.0
Personal relationships 25.0
Saves money 25.0
Other 0.0
If not, why not?
Decreased competition could lead to higher transaction costs 51.7%
Reduced potential for new ideas 20.7
Prefer to shop for specialists 27.6
Other 0.0
Do you have a primary bank lender?
Yes 68.1%
No 31.9
Would you be willing to use your primary bank lender for any of the following services? (Check all that apply.)
Securities underwriting 61.1%
M&A advice 55.6
Foreign exchange 63.9
Risk management 36.1
Private placements 38.9%
Project finance 47.2
Structured financing 61.1
Insurance products 5.6
Asset management 33.3
Pension/401(k) management 38.9
Have you used your primary bank lender for any of the following services? (Check all that apply.)
Securities underwriting 50.0%
M&A advice 18.8
Foreign exchange 50.0
Risk management 21.9
Private placements 25.0
Project finance 15.6
Structured financing 34.4
Insurance products 3.1
Asset management 21.9
Pension/401(k) management 21.9
Do you have a primary investment bank?
Yes 53.2%
No 46.8
Have you used your primary investment bank for any of the following services? (Check all that apply.)
Loan syndication 81.8%
Cash management 31.8
Trust services 22.7
Insurance products 0.0
Asset management 13.6
Pension/401(k) management 22.7
Do you think the ongoing consolidation of financial services companies will benefit your company in the long term?
Yes 36.7%
No 63.3
In retrospect, has the repeal of the Glass-Steagall Act been good or bad?
Good 22.4%
Bad 12.2
Unclear 65.3
If you think it has been good, why? (Check all that apply.)
Permits one-stop shopping for services by companies 25.0%
Permits one-stop shopping for services by individuals 8.3
Makes my job easier 8.3
Concentrates and deepens relationships between organizations 33.3
Concentrates and deepens relationships between individual executives 8.3
Creates more competition for my company’s business 50.0
If you think it has not been good, why? (Check all that apply.)
Concentrates too much financial power 77.8%
Creates more danger of a large financial collapse 55.6
Puts corporate customers at a disadvantage 44.4
Makes my job harder 11.1
Weakens relationships between organizations 33.3
Weakens relationships between individual executives 0.0
Reduces competition for my company’s business 55.6
The results of CFO Forum are based on quarterly surveys of a universe of 1,600 chief financial officers. Because of rounding, responses may not total 100 percent.
