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Cash Management
Services Survey
2012 executive summary
!@#
29th Annual Cash
Management Services Survey
Table of contents
2 Introduction 13 Trade services
1
Introduction
2
2012 participant list by peer group
More than US$87 billion in assets US$13.4 billion to US$87 billion in assets
Bank of America Corporation Associated Bank
Bank of New York Mellon Corporation Bank of the West
BB&T Corporation BBVA Compass
BMO Harris Bank, N.A. BOK Financial Corporation
Capital One, N.A. City National Corporation
Citibank, N.A. Comerica Incorporated
Deutsche Bank Commerce Bancshares, Inc.
Fifth Third Bancorp Cullen/Frost Bankers, Inc.
HSBC Bank USA First Citizens Bankshares
JPMorgan Chase & Co. First Horizon National Corporation
KeyCorp First National Bank of Omaha
Northern Trust Corporation Hancock Holding Company
PNC Financial Services Group, Inc. Huntington Bancshares
RBS Citizens Financial Group M&T Bank Corporation
Regions Financial Corporation Sovereign Bank, N.A.
SunTrust Banks, Inc. Synovus Financial Corporation
TD Bank, N.A. UMB Financial Corporation
Union Bank Webster Financial Services
U.S. Bancorp Zions Bancorporation
Wells Fargo and Company
3
Summary
of key ndings
Continued progress
Measured cash management fee-equivalent revenue grew by 1.5% in 2011. This was
a step up from the 0.5% increase recorded for 2010. A number of factors continue to
hamper stronger growth, but there were positive developments. 2011 was the first year
when the five electronic product areas automated clearing house (ACH), electronic
data interchange (EDI), information reporting, purchasing cards and wire transfer
contributed 50% of measured fee-equivalent revenue. Just five years ago, in 2006, these
five products accounted for less than 40% of total revenue. With electronic products
beginning to dominate, the continued acceleration of revenue growth is more likely to be
sustained as the bottom-line impact of shrinking paper-based revenues has a diminished
influence over the aggregate total.
8%
Fee-equivalent cash
6.5%
6.0%
management revenue growth
6% 5.5%
4.0%
4% 3.5%
3.0%
2% 1.5% 1.5%
0.5% 0.5%
-0.5% 0%
0%
-2% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
estimate
The two most prominent external impediments to faster cash management revenue
growth are well-known and interrelated. The first, the lack of a sustained and robust
economic recovery, inhibits growth in transaction volumes and new customers. The
second, the accompanying super-low interest rates, degrades the value of customers
balances, thereby raising hard-dollar fees.
In troubled times, all expense items draw greater scrutiny, and as cash management
has become more of a fee-based business, it has been subjected to customer cost-
reduction efforts. Low rates have also reduced the numbers of sweep accounts and
their associated monthly fees.
The principal internal impediment to faster growth is the drag created by the The 2012 surveys
deterioration of paper-based revenue. Revenue declines in clearing paper-based checks
and controlled and general disbursement services eat into any revenue gains from all-bank average pretax
electronic and card payments. However, the positive consequence of fewer paper-based profit margin for treasury
payments has been growth in electronic payments and increased profit margins. The
2012 surveys all-bank average pretax profit margin for treasury services was 45%. This services was 45%.
was a clear improvement over the mean 41% profit margin recorded in the 2011 survey.
The respondents forecast 3.5% revenue growth in 2012. We also anticipate continued
improvement, but expect to see a slightly more modest growth rate of 2.5% or perhaps
3.0% this year.
Wholesale lockbox reported weaker results in 2011 with a modest drop of 0.5%, and coin
and currency revenue also suffered a small decline of 1.0%. The four remaining products
also lost ground in 2011, but their rates of revenue deterioration were less severe than
in 2010. Retail lockbox fell by 2.5%, and the demand deposit account (DDA) category,
which includes sweep fees, was down 3.0%. Finally, check clearing and controlled
disbursement were down 6.0% and 7.0%, respectively. For more details see the cash
management revenue chapter.
Last years survey respondents predicted further improvement and forecast 2.5%
growth in 2011. While we also anticipated an advance in 2011, we believed revenue
growth would fall short of the respondents goal. In fact, the current survey results for
2011 indicated incremental progress, with a 1.5% rise in revenue. Given the stop-start
nature of this under-performing recovery, even this relatively small increase should
be appreciated.
The remaining banks surveyed, Peers 2 and 3, turned in 1.5% revenue growth in How was revenue measured?
2011. Only four of the 25 banks in Peers 2 and 3 reported a revenue decline. In the
The 2012 CMS Survey collected banks fee-
previous survey, the banks outside the top 20 joined the Peer 1 banks in anticipating
equivalent cash management revenue for the
2.5% growth in 2011. last two completed calendar years (2010 and
2011), enabling us to calculate both revenue
While each of the three segments failed to meet its forecast for 2011, it should be growth and the overall size of the business
noted that every segment improved upon its 2010 performance. Looking forward, as for the top 100 banks. Our methodology
the accompanying chart indicates, both the top five banks and the other 15 in Peer 1 includes estimating the revenue of non-
forecast 3.5% revenue growth in 2012. Peers 2 and 3 set a slightly more modest goal, respondents based either on their previously
received data or on data from their peers.
calling for a 2.5% increase.
Respondents were also asked to provide a
revenue estimate for 2012, the current year.
Fee-equivalent cash management revenue growth by The questionnaire asked participants to
bank segment include only fee-equivalent revenue from
their cash and treasury management
customers. These encompass corporations,
8%
the middle market, small businesses,
government, correspondents and other
6%
non-retail customers on account analyses
that allocate revenue to the products and
4.0% services used. Fee-equivalent revenue
4% 3.5% includes service charges and penalty fees
3.0% (e.g., per-item charges for overdrafts),
2.0% 1.5% 2.5%
1.0% regardless of whether payment was made
2% 0.5% via compensating balances or fees. However,
-2.0% 0.5% income earned from excess balances, float
0% 0% and the spread between the customers rate
0%
(e.g., earnings credit rate or sweep account
rate) and the banks actual investment rate
-2%
was excluded, as were rate-based charges for
2008 2009 2010 2011 2012 negative balances.
estimate
The specific products and services included
were account reconciliation, ACH and
Top ve providers Other 15 in Peer 1 Peers 2 and 3
EDI, controlled disbursement, information
reporting, retail and wholesale lockbox,
check clearing (including remote deposit),
coin and currency services, wire transfer,
2011 fee-equivalent revenue of US$16.25 billion purchasing cards and the DDA category.
The 2012 CMS Survey asked respondent banks for revenue from the last two DDA included fee income from general
completed calendar years, 2010 and 2011, along with an estimate for 2012. This disbursement activity, account maintenance,
statement services, zero-balance accounts
allows respondents to adjust their previously reported totals for 2010 to reflect recent
and non-interest-related overdraft and sweep
mergers, acquisitions or changes in methodology. Fee-equivalent revenue in 2010 for account charges.
the top 100 banks was measured at US$16.00 billion, and with the 1.5% increase in
2011, revenue reached US$16.25 billion. If the respondent forecast for 3.5% growth Measured purchasing card revenue
comprised all associated fee-based revenue,
in 2012 is realized, total fee-equivalent revenue will be about US$16.80 billion.
including penalty fees for late payments,
even if some portion of this revenue was
shared with other areas of the bank or an
Paltry growth in non-fee income outside vendor. Respondents were asked to
Beginning in 2003, to supplement our fee-equivalent measure, we asked respondents exclude any revenue returned to customers
to share their domestic cash management revenue derived from the products (i.e., rebates or waivers), card association
fees or any revenue derived from interest
captured by the CMS Survey, including revenue from excess balances, float and spread
payments. Finally, respondents were
income that is allocated to treasury services. All of the top five providers and about instructed not to deduct the cost of funds.
half of the other respondents provided this data in the 2012 survey. Based on those
answers and our approximations for the non-responding banks, we estimate that total
cash management revenue for the top 100 banks for 2011 was about US$30.60 billion.
Fee-equivalent revenue, measured at US$16.25 billion, provided about 53% of the total.
Float, spread and excess-balance income added the remaining 47%, contributing about
US$14.35 billion.
Share of 2011
The US$30.60 billion total measured for 2011 was a 1.0% increase over the 2010 fee-equivalent revenue
total of US$30.30 billion. Non-fee revenue derived from float, spread and excess-
balance income increased by less than 0.5%, growing from US$14.30 billion in 2010 to
US$14.35 billion in 2011. The vast majority of the growth (US$250 million) came from Peers
2 and 3
fee-equivalent revenue. 12.0%
Other
15 providers
Share of revenue by bank segment Top
5 providers
in Peer 1
26.0%
The top five cash management banks reported having a 62.0% share of the revenue 62.0%
measured in 2011, unchanged from 2010. The share of the other 15 banks in Peer 1
increased slightly from 25.5% to 26.0%, while the share for Peers 2 and 3 declined from
12.5% in 2010 to 12.0% in 2011. Changes in market share among the surveys bank
segments may be influenced by several factors, including disparate revenue growth
rates, changes in group membership (due to changes in asset rank or mergers and
acquisitions) and restatements of revenue numbers. Mergers and acquisitions played a
significant role in this years changes.
In total, the respondents reported that 26% of their 2011 revenue came from large
corporations, defined as firms having more than US$250 million in annual sales. The
middle market (firms with US$50 million to US$250 million in sales) continued to be the
biggest segment, contributing 30%, while small business (firms with less than US$50
million in sales) accounted for 17%. Financial institutions (other banks, thrifts and
credit unions) and the government and nonprofit sector were the smallest segments,
responsible for 14% and 13%, respectively, of 2011 revenue.
Compared with the results for 2010, there were several noteworthy changes. The share
of revenue from middle-market customers fell from 32% to 30%, and the small business
segment dropped from a 19% share to 17%. Offsetting these declines were growth in the
large corporate sector, from 25% to 26%, while government and nonprofit customers
share jumped from 10% to 13%. The percentage of revenue from financial institutions
was unchanged at 14%.
6.0%
5%
3.5%
1.5%
0.5% -0.5% -1.0% -2.5% -3.0% -6.0% -7.0%
0%
-5%
-10%
P Card Wire ACH/EDI Info. ARP WLBX C&C RLBX DDA Check CDA
Wholesale lockbox (WLBX) and coin and currency (C&C) reported minor revenue dips
of -0.5% and -1.0%, respectively. Retail lockbox revenue decreased by 2.5% in 2011,
and DDA revenue dropped 3.0%. As was the case in 2010, the biggest losses were
seen in check clearing (Check) and controlled disbursement (CDA), down 6.0% and
7.0%, respectively.
Wire
The remaining four areas maintained their share of revenue. DDAs share was unchanged El
ec Info.
at 21.0%. Information reporting accounted for a 9.5% share and ACH/EDI continued to t ro
nic
p ro d u c t s
contribute 8% of the total. Lastly, account reconciliation was also unchanged, adding
3.5% of revenue.
The CMS Survey collects domestic cash management revenue, with the exception of the
cross-border components of wire transfer, ACH, EDI and remote capture. Wire transfer
revenue includes all revenue associated with same-day US dollar transfers between US
and foreign locations and within the United States (excluding revenue from transfers
between two non-US locations). A small portion of ACH, EDI and remote deposit
revenues were from cross-border payments.
Forty-four percent of all treasury personnel were in customer service roles. This
percentage was unchanged from the 2011 survey. The percentage of sales personnel
decreased from 36% in 2011 to 34% this year. Product management personnel increased
slightly, from 12% in 2011 to 13% in 2012, as did the all others category, rising from
8% in 2011 to 9% this year.
Each of the three peer groups continued to have a distinctive distribution of personnel.
The top 20 banks typically have more personnel in customer service, while smaller
institutions assign more people to a sales role. We believe sales personnel in the smaller
banks (i.e., Peers 2 and 3) often perform some customer service functions, and this
may be part of the reason for the disparity. Another factor to consider is that customer
implementations or on-boarding at big banks is likely to be more complex for larger
clients, thereby requiring additional implementation personnel within customer service.
On average, incentive pay accounted for 21% of total compensation, unchanged from
the 2011 survey. Among the respondents with incentive plans, bonus plans were more
than twice as prevalent as commission plans. Only three banks offered both bonuses and
a commission plan for their cash management sales force.
All five banks currently providing eBAM services said their offering included the ability
to open bank accounts. Only three banks were currently able to close accounts or
handle signer maintenance via their eBAM service. All five said their eBAM solution was
web-based, and two banks could also provide this service host-to-host. Four of the five
reported that their eBAM solution used ISO 20022 standard messaging.
20%
15.0%
10%
3.0%
0%
2009 2010 2011
-10%
Decline in transactions
We also compared the annual number of transactions and the total dollar value of
transactions among the respondents that participated in both the 2011 and 2012
surveys. We observed a broadly based 5% decline in the overall number of trade services
transactions. Sixty-three percent of the banks providing data for both years reported
fewer transactions.
Among the banks that responded to the 2011 and 2012 surveys, the dollar value of
trade transactions grew by 20% in 2011. This was reminiscent of the 22% increase in
dollar value measured for 2010. Slightly more than two-thirds of the banks providing
data for 2010 and 2011 reported an increase in the value of their trade transactions.
Supply-chain nancing
Twelve of the 21 respondents (57%) said they offered some type of supply-chain
financing to their customers. Six banks offered both trade-receivables and purchase-
order financing. Another four provided only trade-receivables financing while the last
two offered only purchase-order financing.
We collected annual fee-equivalent revenue from the financial institutions and requested volume, product
feature and pricing data from all respondents. For some product areas, we also requested the number of
accounts and, in the case of sweep accounts, average daily balances. When prices were collected, we generally
used a market-basket approach, obtaining the total fee for the group of charge codes required to perform an
application. The survey gathered information on the cash management products and services listed below.
Upon receipt of the completed questionnaires, Ernst & Youngs Cash Management practice reviewed the data in
comparison with prior years responses and other participants answers. Many participants were contacted to
obtain clarifications. After this review, responses were entered into the CMS database.
The questionnaire requested 2010 and 2011 total fee-equivalent revenue, as well as revenue by product, to
enable us to create estimates for the top 100 banks. The process included approximating the revenue of non-
respondents based on their asset size or prior data they may have submitted. We were also able to calculate
the respondents forecast for the current year by using their estimated 2012 revenue. Volume and pricing
trend analyses were performed by comparing prior-year and current-year data among banks that responded in
both 2011 and 2012. This process was made possible by the continued participation of most major banks over
many years.
New York
CMS Survey Director
Larry Forman, CCM +1 212 773 1111 lawrence.forman@ey.com
Kansas City
Executive Director Cash Management
Alan Zimmerman, CCM +1 816 480 5317 alan.zimmerman@ey.com
The price for the 2012 CMS Survey ranking report is US$31,000. Ranking data from the 2012 trade services
survey is also available for an additional US$3,000 when purchased in conjunction with the 2012 CMS Survey
ranking report, or for US$5,000 when purchased separately. For more information about cash management
market research and the ranking report, contact Larry Forman at +1 212 773 1111 or by email at
lawrence.forman@ey.com.