Wallet Share & Bank Fee Analysis

There is consensus amongst treasurers: we look to be fair to our banks, and manage the relationships between different banks to ensure fair treatment and reasonable returns to our banking partners. This becomes much easier if we have a tool to track how much business we are giving, and the income banks generate from this. As one participant put it, we will squeeze harder a bank who we think is doing well out of us, and go more gently on one who is not.

The tools used to obtain this understanding vary from the highly sophisticated to a feeling that we need to do something. All treasurers who have implemented a tool feel they get a benefit from it, but all agree that this is not a scientific process, and it is one which starts out as a rough approximation and then gets refined over the years, in large part by sharing the results with the banks. 

Banking fees: a lot of treasurers do not track or analyse these. One does so for the first few months after implementing a new agreement. Many TMSs have a bank fee analysis module.

One of the more sophisticated approaches tracks a risk weighted return. The risk weighting is based on the company’s view – it is likely this will not match the risk weighted calculations imposed by the regulators.

In all cases, whether looking at loan business, guarantees, FX etc, the company has to estimate the return the bank is making. While banks are reluctant to share their internal figures, they will provide guidance.

Several participants found that banks often missed out portions of the business when doing their internal analysis of the relationship. Again, this is where sharing the results helped. Areas which came up as often being missed out relates to corporate credit cards for travel expenses, and credit card acquiring, especially as these are often awarded to local banks.

One area of frustration was around items such as investment banking fees, where senior management often gets involved in bank selection, and the analysis of wallet share is not always taken into account.

The attached discussion is lengthy, but it does provide a good view of what treasurers are doing: there is clearly no single textbook or ready made IT system.