Rival Survey of US CFOs from BoA Merrill Strikes More Cautious Tone than TD Bank Findings

A survey of financial executives at US companies conducted by Bank of America Merrill Lynch (BoA Merrill) is markedly less positive than a recent similar survey conducted by TD Bank.

According to BoA Merrill’s latest ‘CFO Outlook’ conducted by Granite Research Consulting, which polled 602 executives in its 15th annual survey, chief financial officers (CFOs) continue to be concerned about the state of the US economy, with only two out of five expecting growth in 2013. They gave it an average score of 49 out of 100, against 44 in the 2012 report, while the global economy registered a score of 45, up from 43 a year ago.

Optimism about economic growth remained muted, with only 39% of CFOs predicting expansion in 2013, compared with 38% last year. Perhaps more telling, 24% of executives said they expect the economy to contract this year, up significantly from 11% in 2012.

“It is clear that uncertainty continues to linger among CFOs, which is understandable given the broader economic issues both in the US and overseas,” said Alastair Borthwick, BoA Merrill’s head of global commercial banking. “Until they see solid evidence of stability, CFOs will be guarded in their optimism and growth plans. Expansion still is possible but may be limited in the short term to certain industries and markets.”

Despite concerns about contraction, most CFOs still expect their companies to avoid layoffs. Only 8% predicted a reduction in workforce during 2013, compared with 7% last year. Meanwhile, 48% said they expect to maintain the current number of employees, while 45% said they expected to hire employees. Both responses are similar to last year’s BoA Merrill survey.

One area of significant growth in the latest ‘CFO Outlook’ was international activity, with 73% of CFOs saying their companies are involved in non-US markets against 54% in the previous annual survey, and executives reported increased buying from non-US markets (62% against 47% last year), selling to non-US markets (55% vs. 34%) and operations in non-US markets (30% vs. 15%).

Other notable findings in the 2013 ‘CFO Outlook’:

  • Among potential impacts on the US economy, the effectiveness of the US government was listed as a concern by 64% of executives. In addition, 63% listed the US budget deficit and 62% listed healthcare costs.
  • The top financial concern for CFOs’ own companies was healthcare costs, chosen by 58% and followed by revenue growth at 43% and cash flow and corporate tax rates, both at 34%.
  • Regarding revenues and profits, 56% of CFOs expect revenue growth – the same as last year – while 40% anticipate a growth in profit margin, down slightly from 41% last year.
  • Only 17% of CFOs expect their companies’ borrowing needs to increase in 2013, down from 28% in 2012, while 17% expect those needs to decrease, up from 12%.
  • Regarding financing, 19% of executives expect the cost of capital to increase, down from 21% last year.
  • Merger and acquisition (M&A) activity could pick up slightly, with 22% of CFOs saying they expect to participate in an M&A deal in 2013, up from 18% a year ago.
  • CFOs increasingly expect labour costs to rise, with 72% predicting higher costs per employee, compared with 58% last year.
  • The top reasons CFOs cited for not hiring additional employees in 2013 were insufficient customer demand (56%), uncertainties about higher healthcare and insurance costs (32%), and worries about the sustainability of the economic recovery (29%). This latter justification has caused some cash hoarding by treasuries


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