US Corporate Treasurers Continue to Hoard Cash, Finds AFP CCI Survey

Corporate treasurers in the US are in a holding pattern hoarding their firm’s cash reserves due to the tough economic picture at the moment, according to the Association of Financial Professionals (AFP) which released its latest quarterly Corporate Cash Indicators (CCI) survey at the opening day of the AFP Annual Conference in Miami, US, on 14 October.

Quarter-to-quarter, 40% of the large corporates that report into the AFP CCI survey had greater cash balances at the end of Q312 than they had at the end of Q212. Only 26% of the reporting organisations had cut their cash reserves over the last quarter.

The quarterly CCI study, sponsored by State Street Global Advisors, measures recent and anticipated changes in US corporate cash reserves and has been running every quarter since January 2011.

The comparative yearly Q3 figures also showed a 40% increase in the number of large corporates saving cash, versus the same figure for 2011. In addition, companies reported that their investment selection for cash and short-term investments had become neither more nor less aggressive, suggesting a ‘wait and see’ approach is still prevalent for US corporate treasurers. This is in common with much of the rest of the world as fears about an Asian slowdown, the US fiscal cliff and the eurozone crisis retard global growth and investment.

Looking forward, the build-up of US cash balances is expected to slow slightly from its current levels, says the AFP, with only 33% of the CCI survey respondents saying they expect to grow their cash and short-term investment balances over the next three months, covering the last quarter of 2012. Almost a fifth of respondents, 21% of US corporate treasurers, said they will instead reduce their cash balances during Q412. 

Jim Kaitz, AFP’s president and chief executive officer (CEO) said that this sidelined cash is withholding the fuel for economic growth. “This is the money that companies would use for new projects, expansion, research and development [R&D], and, ultimately, job creation,” he said. “Only when uncertainty dissipates, confidence in the economy improves and companies release their cash will the job picture significantly improve.” 



Related reading