After years of viewing banks as suppliers of commodity-like products, corporate treasurers are looking to build more strategic, deeper relationships with their banks.
People attending the Treasury Management Association's annual conference here this week said they are trimming the number of banks with which they deal. By building more strategic relationships with fewer banks, treasurers said, they hope to gain access to better cash management systems as well as to credit, even in tough times.
The trend is also being fueled by consolidation in the banking industry, which is forcing treasurers to make their business worthwhile to a shrinking number of giant providers.
"We are going to have to be better customers to fewer banks," said Douglas E. Downey, director of cash management at Columbia/HCA Healthcare Corp. "We're a company that has 40 banks, and we're trying to find some long-term partners."
Since credit is the key driver in most of Columbia's dealings with banks, the company does "partnership reviews" to ensure that its largest credit providers are rewarded with a fair share of fee business, Mr. Downey said. Similarly, banks that are found to be getting a disproportionately large chunk of fees from Columbia are asked to step up to the plate and lend the company more.
Overall, Columbia is paring significantly the list of banks from which it solicits bids to provide fee services, Mr. Downey said. The move recognizes that banks incur great expense in responding to requests for proposals to supply technology-based services.
Mr. Downey urged his fellow cash managers to review all their bank partners and determine which are purely transactional and which are truly relationship-driven. Transactional relationships, in which a low-cost provider delivers a commodity-like product, are most likely to fall by the wayside during a bank merger, he said.
"The low price will set off alarms," Mr. Downey said.
Stephen M. Kearney, treasurer of the U.S. Postal Service, also sang the virtues of moving away from low-cost providers in favor of fewer, more selective, strategic banking relationships.
Under Mr. Kearney, the Postal Service, which collects cash at 39,000 offices, pared its banking relationships to 24, from 5,300, in 18 months. The move has saved it $23 million in depository fees in two years. "I can personally get to know 24 banks," Mr. Kearney said. "We can monitor and track their services."
"By moving to strategic partnerships we can get better customer service for our existing cash management business," he later added.
For years, the Postal Service had a policy of buying banking services only from the lowest-cost provider. That virtually guaranteed that it would not have access to innovative banking products.
But once the Postal Service signed long-term service contracts with banks, it gained credibility, and the banks were then willing to develop more specialized and sophisticated products.
"A certain number of banks stepped forward and met our challenges," Mr. Kearney said. "They did decide they wanted a long-term relationship with the Postal Service."
For example, its core banks are helping it sell stamps over the Internet and to develop a purchasing card that its employees can use to pay for their uniforms.
"There is a value in strategic banking relationships," Mr. Kearney said. "Aside from our own people, the banks are our greatest resource. It took me a while to realize that."
Mark Webster, a senior manager at PricewaterhouseCoopers, said it is not surprising that banks would be eager to work with the Postal Service since it cannot go bankrupt nor be merged out of business. But bankers expressed enthusiasm for building strategic relationships with all types of corporations.
"Long-term relationship banking is increasingly important," said Edward F. Sykes Jr., a senior vice president at BankAmerica Corp., Charlotte, N.C. "Those customers that are just shopping for price are going to find it tougher. We banks are doing a better job finding out who we make money from. And some banks may not be giving the best service to customers that are not profitable for them."