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Survey: Bank Relationships Determine Where Companies Put Their Cash

2019 AFP Liquidity Survey, Underwritten by State Street Global Advisors, Reveals How Organizations Prioritize Operating Investments

June 25, 2019 -- Bethesda, Md. – Bank relationships are core to businesses’ operating cash investment mix, according to the 2019 Association for Financial Professionals Liquidity Survey, underwritten by State Street Global Advisors.

In a survey of nearly 500 corporate treasury and finance professionals conducted in March, 93 percent of respondents consider the overall relationship with their banks to be a determinant when deciding where to place their organizations’ cash and short-term investments. The continued dominance of banking relationships highlights the key recurring investment themes of safety, liquidity and yield.

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Fully 68 percent of respondents indicate that the credit quality of a bank also is a deciding factor when determining where to invest. Organizations that are privately held, non-investment grade and net debtors are more reliant on their banks than are other companies.

“Banks are financial professionals’ key partners and that relationship is a major determinant in deciding where to place operating cash,” said AFP president and chief executive officer, Jim Kaitz. “However, our research does show that bank deposits have gradually declined year-over-year. It will be interesting to see if practitioners will continue to emphasize bank relationships in an uncertain interest rate environment.”

Looking forward, as real-time payments take shape, treasury departments will need to consider sourcing liquidity in real time. Fully 39 percent of survey respondents expect the money market industry to provide liquidity 24/7.  

The 2019 AFP Liquidity Survey also revealed a shift toward yield for money market funds. Although a fixed or floating net asset value (NAV) was still the most popular reason for choosing a money fund at 56 percent, yield ranked second (40 percent), followed by fund ratings (38 percent). This is a shift from last year when yield was ranked third after the “relationship value from the investment manager.”  

“We continue to see high cash balances acting as a buffer in the face of market uncertainty,” said Barry F.X. Smith, COO of State Street Global Advisors Global Institutional Group. “Cash management is increasingly being used by investment professionals as part of a broader corporate strategy.”

About AFP®

Headquartered outside Washington, D.C. and located regionally in Singapore, the Association for Financial Professionals (AFP) is the professional society committed to advancing the success of its members and their organizations. AFP established and administers the Certified Treasury Professional and Certified Corporate FP&A Professional credentials, which set standards of excellence in finance. Each year, AFP hosts the largest networking conference worldwide for more than 7,000 corporate finance professionals.

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