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Corporate Cash Grew at Year-end, but Treasurers to Shed Cash in 1Q13

  • By Staff Writers
  • Published: 2013-01-28

U.S. corporate treasurers held larger cash balances at year-end 2012 than they did for the previous quarter or the previous year, according to the most recent AFP Corporate Cash Indicators™ (AFP CCI), a quarterly study released today that measures recent and anticipated changes in U.S. corporate cash balances.

The study, underwritten by State Street Global Advisors, showed that quarter-to-quarter, 37 percent of reporting organizations had greater cash balances at the end of 4Q12 than they had at the end of 3Q12. Meanwhile, 32 percent had cut cash reserves.

Year-over-year, 47 percent held greater balances at the end of 4Q12 than they had at the end of the 4Q11, while 27 percent held smaller cash balances.

Looking forward, companies anticipate shedding cash in the first quarter of 2013, with 28 percent expecting to reduce cash balances vs. 23 percent expecting to increase cash balances. The forward-looking indicator is negative for only the second time in the history of the survey.

Asked what impact, if any, the recent fiscal cliff agreement would have on their organization’s decision to deploy cash to fund growth-oriented investments, a full 91 percent of finance professionals responding to the survey said there would be no significant impact.

Meanwhile, companies reported that their investment selection for cash and short-term investments had become neither more aggressive nor more conservative. In an environment where  yield on short-term investments has become virtually non-existent, unlimited FDIC insurance for commercial bank accounts has expired, and the future regulatory environment for money market mutual funds remains uncertain, some finance pros commented that they were now focusing exclusively on U.S. Treasury money market funds and overnight deposits. Others told AFP they were moving unneeded cash to longer-term reserves or moving international cash “further out on the curve.”

 “Interestingly, a number of finance pros have told us they have recently tapped their excess cash to fund acquisitions,” said Jim Kaitz, AFP’s president and CEO. “More often, we hear they are accessing their cash to pay down debt, repurchase shares or issue dividends.”

AFP Corporate Cash Indicators™
------------------------------------------
+5   4Q12 v. 3Q12
+20  4Q12 v. 4Q11
-4   1Q13 expectations

  Represents “increase” percentage minus “decrease” percentage. See www.afponline.org/CCI

The AFP CCI™ provides treasury and finance professionals, policymakers and market analysts with timely data on a determinant of economic activity: corporate cash. The AFP CCI™ is created and maintained by the Association for Financial Professionals (AFP), a professional society that serves corporate finance departments globally.

Methodology: On the opening days of each quarter, AFP asks select members whether their short-term holdings increased or decreased in the past year and past quarter; whether investment selections for those holdings changed in the last quarter; and whether they expect cash holdings to increase or decrease in the coming quarter. For consistency, AFP asks the same questions each quarter. AFP members have agreed to participate in this ongoing study on a long-term basis. AFP began collecting quarterly data in January 2011 and has now collected eight data sets. For more information. See www.afponline.org/CCI.  The next set is slated to be published April 29, 2013.

AFP Corporate Cash Indicators™ is a trademark of the Association for Financial Professionals. All AFP Corporate Cash Indicators™ survey questions and reports are the copyrights of the Association for Financial Professionals, and all rights are reserved. For information about publishing the CCI on your site, see www.afponline.org/CCI or contact pr@afponline.org.
 

Copyright © 2014 Association for Financial Professionals, Inc.
All rights reserved.

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