Despite turmoil among major banks during two years of global market crisis, the business of providing corporate banking services to the largest US companies continues to be dominated by a handful of mega-banks, according to the results of Greenwich Associates’ 2010 US Large Corporate Banking Study.
Eighty-seven percent of Fortune 500 companies do business with Bank of America Merrill Lynch (BAML), 80% use JP Morgan, and about two-thirds each use Citi and Wells Fargo. These banks are the 2010 Greenwich share leaders in US corporate banking.
In this market, the biggest are also the best. BAML and JP Morgan are the 2010 Greenwich quality leaders in US large corporate banking. Greenwich quality leaders are firms that have distinguished themselves by receiving quality ratings from corporate clients that exceed those awarded to competitors by a statistically significant margin.
Debt Capital Markets: JP Morgan and BAML Top in Size
JP Morgan and BAML are also 2010 Greenwich share leaders in US debt capital markets. Seventy-eight percent of Fortune 500 US companies name JP Morgan as an important debt capital market relationship, and approximately 70% cite BAML. “Although companies often allocate their debt capital markets business to their primary lenders, in the US companies that do so do not sacrifice in terms of quality or capabilities,” said Greenwich Associates consultant John Colon.
Battle for Marketshare
The study results suggest that US banks could be on the verge of a marketshare war within the Fortune 500 client segment.
Feedback from large US companies makes clear that banks are now on a much more stable footing and are more able to compete for lending business in the Fortune 500. The fact that the banks are generating fewer revenues in this business due to tepid demand from these large borrowers is prompting some banks to get more aggressive in rates and terms.
“It is a unique moment in US corporate credit markets,” said Greenwich Associates consultant Don Raftery. “At a time when many smaller businesses are still starved for credit, there appears to be more providers looking to lend than demand for increased bank debt in the Fortune 500. This is particularly true as many companies have paid down bank debt and locked in low rates through long-term bond offerings.”
The wide availability of credit to Fortune 500 companies is bad news for banks that made headway among this client segment as some of the largest US banks struggled during the during the global crisis. That group is led by several foreign banks that gained substantial numbers of new ‘core banking’ relationships with Fortune 500 companies in the US from 2008 to 2010.
“Many of these new relationships arose in part because these banks were able and willing to lend in a period of difficult credit conditions,” said Colon. “The sustainability of these gains will be tested in a much different and more competitive credit environment.”
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