Credit Crisis Represents Historic Opportunity For Small, Regional and Foreign Banks
( Greenwich Associates )
(April 7, 2008)
Among Global Companies, Banks Suffer Write-Downs In Reputation
New Study: Credit Crisis Represents Historic Opportunity For Small, Regional and Foreign Banks
Monday, April 7, 2008 Greenwich, CT USA - With companies relying on banks for the capital they need to operate and grow their businesses, secure banking relationships rank among a company's most important financial assets. Since the collapse of the U.S. sub-prime mortgage market in August 2007, however, the performance of banks in the United States, Europe and Asia has shaken some companies' confidence in their reliability as sources of essential funding.
Not surprisingly, the banks that have incurred the biggest write-downs on exposures to troubled credit products have suffered the biggest hits to their reputations. In a February survey, Greenwich Associates asked nearly 300 large companies in Asia, Europe and the United States to name the corporate banks they do business with and to describe how each firm's handling of the current market turmoil has affected its reputation.
The results of this research indicate that, on a global level, banks tend to fall into three categories:
1) Those whose reputations have been significantly weakened by the events of the past six months
(Note: The February 2008 survey was completed prior to the release of first quarter results from Goldman and JPMorgan's acquisition of Bear Stearns.)
2) Those who to this point have emerged relatively unscathed
3) Goldman Sachs and JPMorgan - the only firms whose reputations have actually been enhanced by their performance throughout the crisis
"The one interesting outlier to this classification scheme is Soci‚t‚ G‚n‚rale. The significant decline in Soci‚t‚ G‚n‚rale's reputation among companies around the world is attributable to the actions of a single 'rogue trader,' as opposed to its overall performance throughout the credit crisis," says Greenwich Associates consultant Robert Statius-Muller.
Greenwich Associates also asked companies to indicate how the performance of individual banks during the crisis would affect the amount of future business they do with these organizations. "Companies' responses to this question can be taken in one of two ways," says Greenwich Associates consultant Jay Bennett. "On the one hand, for some of the hardest-hit firms like Citigroup and UBS, the fact that 15-25% of their corporate clients expect to shift some of their business to other firms as a result of market events should be cause for serious concern. On the other hand, most companies who say these firms' reputations have taken a hit are not yet planning to pull any of their business, which suggests that these organizations have an opportunity to restore their trust and preserve these relationships."
However, the research results also suggest that the global crisis could represent an historic opportunity for those mid-sized or regional banks that have steered clear of credit-related write-downs and losses. Companies in the United States say the events since August 2007 have enhanced the reputations of regional banks like Wells Fargo and foreign banks with relatively small U.S. franchises, such as Royal Bank of Scotland/ABN AMRO, and BNP Paribas. European companies say the same about banks such as Nordea, ING and Santander, which are viewed largely as regional players. In Asia, between 10% and 20% of companies say that, as a result of the current market turmoil, they plan to increase the amount of business they do with regional banks such as the Bank of China, ICBC and Calyon.
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Greenwich Associates is the leading international research-based consulting firm in institutional financial services. Greenwich's studies provide benefits to the buyers and sellers of financial services in the form of benchmark information on best practices and market intelligence on overall trends. Based in Greenwich, Connecticut, with additional offices in London, Toronto, Tokyo, and Singapore, the firm offers over 100 research-based consulting programs to more than 250 global financial-services companies. Please contact us for further information or to arrange an interview with one of our consultants. You can visit our website, www.greenwich.com, for more information.