Europe’s biggest companies are caught in a banking bind – many of the global banks that FT 500 companies rely on for credit and international financial services are under duress, while smaller, healthier banks lack the sophisticated capabilities these companies require. Almost half (45%) of the large European companies participating in a recent Greenwich Associates survey about the effects of the credit crisis said they were looking to form relationships with new banks willing to assume the role of ‘core’ credit providers, while 42% said they were looking for new secondary credit providers.
“Those plans could prove difficult to execute,” said Greenwich Associates consultant Robert Statius-Muller. “According to the results of our annual European Corporate Banking research study, the total number of banks used by large European companies declined slightly to an average 14.5 at the start of Q4 2008 from 15.3 at the same period in 2007 – likely owing to both the disappearance of some banks and retrenchment among others.”
Over the same period, the competitive positioning of Europe’s major corporate banks was surprisingly stable, lacking the big swings in market penetration that would be associated with large numbers of companies forming new relationships for credit or other banking services. “These findings reveal two things,” said Greenwich Associates consultant John Colon. “One, that corporate banking relationships are sticky; and two, that companies -especially large companies – just don’t have many options.”
Out of the top 10 banks in terms of corporate banking market penetration, European companies gave their highest quality ratings to BNP Paribas in 2008, followed by Citi at number two and The Royal Bank of Scotland in third, with Barclays rounding out the top four. “These results suggest that companies cannot assume a direct relationship between the public troubles of individual banks and the service quality that these organisations are delivering to their corporate clients,” said Colon. “While some struggling banks saw their quality scores decline from 2007 to 2008, others held steady and certain banks gained ground. Some of these banks have built very strong customer-facing businesses that found themselves with the bad luck of being stuck inside of very troubled organisations last year.”
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