2013-04-29-奥纬咨询-The_Clash_for_Cash_16页_575kb

Summary of THE CLASH FOR CASH: Attracting Corporate Liquidity in Asia Pacific Without a Transaction Banking Franchise

Core Content

This document explores the growing competition among banks in the Asia-Pacific region to attract corporate liquidity, particularly corporate cash reserves, in the context of a low-interest-rate environment and evolving regulatory requirements. It argues that while transaction banks dominate the cash management space, non-transaction banks can also compete effectively by leveraging their corporate advisory relationships and offering structured products or asset management services.

Main Points

Corporate Cash Reserves in Asia-Pacific

• Asian listed companies have accumulated significant cash reserves, with total holdings reaching US$2.3 trillion by the end of 2012.
• Cash and cash equivalents have grown at a 17% CAGR from 2007–2012.
• China has been a major driver of growth, with listed cash reserves increasing by 250% from 2007 to 2012.
• Japan holds the largest corporate liquidity pool in the region, with US$863 billion in cash reserves.
• Emerging markets (e.g., Indonesia) have also seen strong growth in corporate cash holdings.

Excess Cash and Its Significance

• Only a small portion of corporate cash is used for operational purposes, while the majority (70–85%) is excess cash, which is more mobile and presents an opportunity for non-transaction banks.
• Non-listed companies also hold a substantial amount of cash, with ~US$8 trillion in Asia-Pacific alone, though most are small or medium-sized enterprises.

Drivers of the Clash for Cash

1. Basel III NSFR requirements: Banks need more stable, long-term funding, and deposits are a key source.
2. Regulatory pressures: Asian countries are pushing foreign banks to build self-sufficient domestic deposit bases, increasing competition.
3. Loan-to-deposit ratio (LDR) trends: In several Asian markets, loan issuance has outpaced deposit growth, intensifying the need for deposits.

Key Opportunities for Non-Transaction Banks

• Corporate advisory relationships are crucial for accessing corporate cash.
• Structured products and asset management services can be used to attract excess cash from corporates.
• Asian MNCs are more likely to maintain multiple banking relationships, making them open to alternative providers.
• Liquidity, security, and counterparty ratings are top priorities for corporate treasurers when deciding on investments.

Revenue and Funding Potential

• Corporate cash represents a multi-billion-dollar funding opportunity and recurring revenue stream for non-transaction banks.
• Every US$1 billion of excess cash captured can generate US$1–10 million in annual revenue, depending on the product margin.
• Structured notes and medium-to-long-term repo agreements can help banks meet Basel III requirements and increase their stable funding base.

Strategic Recommendations

Client Selection

• Focus on companies with strong advisory relationships.
• Target treasurers and CFOs who have budgets and risk appetite for structured investments.
• Use financial ratios to identify companies with excess cash.

Product Offerings

• Differentiate products from transaction banks.
• Offer tailored investment solutions based on client needs.
• Leverage credit ratings and product capabilities to match client risk profiles.

Business Model Adjustments

• Balance deal and non-deal activities to ensure sustainable revenue.
• Align incentives across departments to support client engagement.
• Enhance risk management frameworks and streamline product approvals.

Risk Management Considerations

• Ensure the bank can manage risks associated with structured products.
• Address performance risks through robust monitoring and reporting.
• Integrate structured products into the bank’s overall funding and risk profile.

Oliver Wyman’s Role

• Oliver Wyman has helped non-transaction banks access corporate cash markets.
• Their approach includes opportunity sizing, operational enablers, and implementation roadmaps.
• Successful clients have achieved US$5–10 billion in additional funding and US$20–50 million in recurring revenue annually.

Conclusion

The Asia-Pacific corporate cash market presents a strategic opportunity for non-transaction banks to capture significant funding and revenue by leveraging their advisory strengths and offering structured investment products. With the right customer proposition, people strategy, and business model, banks can effectively compete in the evolving landscape of corporate liquidity management.

Key Information

• Total corporate cash in Asia-Pacific (2012): US$2.3 trillion
• China's cash reserves (2012): US$729 billion (up 250% from 2007)
• Japan's cash reserves (2012): US$863 billion (up 14% from 2007)
• Asia-Pacific's share of global corporate cash (2012): Over 46%
• Excess cash percentage (Asia-Pacific): 70–85%
• Revenue per US$1 billion of excess cash: US$1–10 million annually
• Successful revenue outcomes: US$5–10 billion in funding and US$20–50 million in recurring revenue

Exhibit Highlights

• Exhibit 1: Corporate cash holdings by region and industry (2007–2012)
• Exhibit 2: Corporate cash pool by market (listed companies)
• Exhibit 3: Loan-to-deposit ratios in key Asian markets
• Exhibit 4: Client selection based on financial ratios
• Exhibit 5: Approaches for attracting corporate cash
• Exhibit 6: Revenue potential based on excess cash capture and product margins
• Exhibit 7: Basel III available stable funding (ASF) factors
• Exhibit 8: Key enablers for non-transaction banks

Contact Information

• Oliver Wyman – Global leader in management consulting
• Email: info-FS@oliverwyman.com
• Phone:
  • Asia-Pacific: +65 6510 9700
  • Americas: +1 212 541 8100
  • EMEA: +44 20 7333 8333
• Website: www.oliverwyman.com