Treasury Strategies’ Quarterly Corporate Cash Briefing€¦ · Sources: Treasury Strategies, Federal Reserve, European Central Bank, Office of National Statistics Note: 1Q 2000

© 2013 Treasury Strategies, Inc. All rights reserved.

Treasury Strategies’ Quarterly Corporate Cash Briefing™

27 June 2013

Presented by: Monie Lindsey, Managing Director Tony Carfang, Partner

Sponsors:

Agenda

Corporate Cash Levels What Treasury Strategies’ Clients are Saying Roundtable:

-  Association of Corporate Treasurers (ACT)

-  Federated Investors -  PNC Bank

Treasury Strategies’ Advice to Clients

2

Corporate Cash Levels

3

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

1.80

1.90

2.00

Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13

Total Eurozone Corporate Cash (€T)

Corporate Cash Levels

US corporate cash as of March 31, 2013

4

Source: Federal Reserve, Treasury Strategies

UK corporate cash as of March 31, 2013

£0.52T

Source: Office of National Statistics, Treasury Strategies

€1.99T

Source: European Central Bank, Treasury Strategies

Eurozone cash as of December 31, 2012 0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

1.80


Total US Corporate Cash ($T)

$1.78T

-

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80


Total UK Corporate Cash (£T)

Sources: Treasury Strategies, Federal Reserve, European Central Bank, Office of National Statistics Note: 1Q 2000 = 100

Corporate Cash Index

5

0

100

200

300


Total Corporate Cash Index

US Index, base 2000 EU Index, base 2000 UK Index, base 2000

£0.52T

€1.99T

$1.78T

-

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

Mar-0

0

Mar-0

1

Mar-0

2

Mar-0

3

Mar-0

4

Mar-0

5

Mar-0

6

Mar-0

7

Mar-0

8

Mar-0

9

Mar-1

0

Mar-11

Mar-1

2

Mar-1

3

Total UK Corporate Cash (£T)

Reported in March 2013 Reported in June 2013

UK Corporate Cash Revision

6

£0.52T

£0.73T

Source: Office of National Statistics, Treasury Strategies

Country/Region March 2000 March 2013

United States 10% 11%

Eurozone 14% 21%

United Kingdom 25% 33%

Source: Treasury Strategies’ estimate

Corporate Cash as % GDP by Region

7

Reserve Balances

8

Source: Federal Reserve H3 Report, Treasury Strategies Source: Bank of England, Treasury Strategies

Source: European Central Bank, Treasury Strategies

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13

Ban

k B

alan

ces

at th

e Fe

d N

ote:

1Q

200

0=10

0

Bank Balances at the US Federal Reserve March 2006 - March 2013

0

20

40

60

80

100

120

140

160

180

200


Ban

k B

alan

ces

at th

e B

oE

Not

e: 1

Q 2

000

= 10

0

Bank Reserve Balances at the BoE March 2006 - March 2013

0

100

200

300

400

500

600

700

800

900

1000


Ban

k B

alan

ces

at th

e E

CB

N

ote:

1Q

200

0 =

100

Bank Reserve Balances at the ECB March 2006 - March 2013

Reserve Balances

9

Source: Bank of Japan, Treasury Strategies Source: Swiss National Bank, Treasury Strategies

0

10

20

30

40

50

60


Ban

k B

alan

ces

at th

e B

OJ

(JPY

T)

Bank of Japan Reserves: March 2006 - March 2013

0

100

200

300

400

500

600


Ban

k B

alan

ces

at th

e SN

B (C

HF

B)

Swiss National Bank Reserves: March 2006 - March 2013

What Treasury Strategies’ Clients Are Saying

10


11 Source: Treasury Strategies LinkedIn Poll, June 2013

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

End of 3Q 2013

End of Year 2013

Mid Year 2014

End of Year 2014

Not until 2015 or beyond

Percentage of Respondents

When will interest rates begin to rise significantly?

What Treasury Strategies’ Clients Are Saying: When Will Interest Rates Begin to Rise Significantly?

12

“Maybe it is already starting. Perhaps a good follow up question would be, how confident are you in the Fed's ability to control and manage the rise once it begins?”

Source: Treasury Strategies LinkedIn Poll, June 2013

“Given the continued depression, I think it unlikely that interest rates will increase significantly before 2017…

Previously, significant inflation has been tolerated / encouraged to erode debts and allow "normality" to

prevail within 5 years of the crash…

Not this time, as central bankers believe they are managing the "situation" through coordinated global

actions. I would contend that they are simply dragging it out to no ones benefit.”

“At least in Europe, they should not rise until 2015 or beyond in order to support

the reactivation of the Southern European Countries´ economies.

There is still a lot of to do ...which will not be completed either in 2013 or in 2014.”

“UK Recovery is very slow and fragile. Fuels, food and other consumable prices are set to rise well above inflation and pay and earned income nationally are static. Banks still set in 'modest' mode until they can all demonstrate some consistent progress with requirements of Basel III and reduce their provisions.”


13 Source: Treasury Strategies LinkedIn Poll, June 2013

0% 5% 10% 15% 20% 25% 30% 35% 40%

Banks will retain a key lending role

Banks will retain a key deposit role

Other lenders will grow in importance

Shadow markets will develop

Basel III will not impact corporate finance

Percentage of Respondents

What impact will Basel III have on corporate finance?

What Treasury Strategies’ Clients Are Saying: What Impact Will Basel III Have on Corporate Finance?

14

“European banks are weak, cannot use their balance sheet like before and other means of funding will replace the banks in Europe. Banks will remain important but merely on facilitating access to the capital markets rather than taking things on balance sheet.”

“Banks will retain a key lending role. The other sources of finance base their lending rates on what banks charge which would be obviously higher than that of banks. Unless they are able to undercut banks (which they would be able to do only if they can source funds cheaper than banks - a situation which is unlikely), no significant shift from banks seems likely.”

“More regulation and overburden upon banks isn't the answer to our woes…Diversity in banking is becoming less and less a concern. Concentration of assets among large financial institutions "too big to fail" seems the solution and the problem at the same time for our federal policy. Speaking for community bankers, the idea that Basel III standards won't effect smaller institutions is a farce. If you are looking for a shadow banking system, operating outside of federal control, this seems a good way to create one.”

“Non-bank entities will emerge more so and even though they may be regulated, unnecessary and onerous regulations can be avoided which both Basel II and Dodd-Frank impose now.”

Source: Treasury Strategies LinkedIn Poll, June 2013

Tony Carfang Partner 312.628.6921 [email protected] Monie Lindsey Managing Director +44 (0) 207 872 5551 [email protected]

Martin O’Donovan Deputy Policy & Technical Director +44 (0) 207 847 2577 [email protected]

Deborah Cunningham Chief Investment Officer 412.288.8481 [email protected]

Scott Horan SVP, Treasury Management 412.758.9910 [email protected]

15

Speakers

Please feel free to join our Treasury Management Group on LinkedIn http://www.linkedin.com/e/vgh/50323 Please feel free to join our Financial Services Regulation Group on LinkedIn http://www.linkedin.com/e/vgh/1799642

Potential Game Changers

16

Monetary Policy of Central Banks

Transaction Tax

Too Big To . . .

Next Chapter in MMF Reforms – US and

Europe Basel III

Tony Carfang Partner 312.628.6921 [email protected] Monie Lindsey Managing Director +44 (0) 207 872 5551 [email protected]

Martin O’Donovan Deputy Policy & Technical Director +44 (0) 207 847 2577 [email protected]

Deborah Cunningham Chief Investment Officer 412.288.8481 [email protected]

Scott Horan SVP, Treasury Management 412.758.9910 [email protected]

17

Speakers

Please feel free to join our Treasury Management Group on LinkedIn http://www.linkedin.com/e/vgh/50323 Please feel free to join our Financial Services Regulation Group on LinkedIn http://www.linkedin.com/e/vgh/1799642

Treasury Strategies’ Advice to Clients

Key themes emerging from our work with Corporate Treasurers:

•  NOW IS THE TIME TO SPEAK OUT ON REGULATION.

•  Monitor global markets and central bank activities.

•  Move cautiously when pursuing yield.

•  Improve information flows – ensure global visibility of cash and risk.

•  Strengthen treasury organization and processes.

•  Strengthen balance sheet.

•  Create a roadmap to a Treasury 3.0® environment.

Disclaimer: Treasury Strategies’ recommendations are situation-specific and based upon careful, individual analysis. The advice cited above may or may not be appropriate for your specific situation.

18

About Treasury Strategies, Inc.

Who We Are Treasury Strategies, Inc. is the leading treasury consulting firm working with corporations and financial services providers. Our experience and thought leadership in treasury management, working capital management, liquidity and payments, combined with our comprehensive view of the market, rewards you with a unique perspective, unparalleled insights and actionable solutions.

What We Do Corporations We help you maximize worldwide treasury performance and navigate regulatory and payment system changes through a focus on best practices, technology, liquidity and controls.

Treasury Technology We provide guidance through every step of the technology process. Our expert approach will uncover opportunities to optimize the value of your treasury through fully integrated technology solutions.

Financial Services Our experience, analytic approach and benchmarks provide unique consulting solutions to help you strengthen and grow your business.

www.TreasuryStrategies.com/ content/networking-communities

@TreasuryStrat

Accreditations

Connect with Us

Locations Chicago • London • New York

19

About the ACT

Who we are The Association of Corporate Treasurers (ACT) sets the benchmark for international treasury excellence. As the Chartered body for treasury, we lead the profession through our internationally recognised suite of treasury qualifications, define standards and support continuing professional development. We are the voice of corporate treasury representing the interests of our members.

20

twitter.com/actupdate

youtube.com/treasurersorg

facebook.com/actupdate

www.treasurers.org/linkedin

www.treasurers.org

What we do ACT support s the growth and professional development of treasurers and finance professionals We are an active global network of treasury, risk and finance professionals with members and students in 98 countries.

- We promote treasury as a discipline, as a profession and as a career - We provide informed and unbiased technical advice - We teach, examine and qualify treasury professionals and offer ongoing CPD - We stimulate debate and facilitate the exchange of ideas and information through our events, conferences, webinars and forums - We represent the real economy and influence relevant regulation and market practice.

75.0%

9.2%

15.8%*

Firm-Wide

Liquidity Management Equity Fixed Income

About Federated Investors, Inc.

History of Quality and Innovation �  Founded and headquartered in Pittsburgh PA,

1955 �  Offices in New York, Rochester, Boston, Dublin,

Frankfurt, London and Melbourne �  1,400+ employees worldwide including 223

investment professionals and 84 Chartered Financial Analysts

�  Pioneer of money market and fixed income funds

Publicly Traded �  NYSE listed: FII �  Employees share in approximately 20% of firm’s

ownership Investment Management Singular Focus

�  Committed to delivering long-term outperformance

�  Strategies utilize risk-management process and maintain style consistency

Well-Resourced Investment Teams �  Experienced specialized teams committed to

delivering long-term outperformance

�  Deep historical commitment to proprietary research

�  Majority of investment professionals’ compensation directly tied to performance

21

$ 3 7 9 . 8 B I L L I O N I N A U M F I R M P R O F I L E

46.9%

30.4%

22.7%

4Q Revenue by Source

Liquidity Management Equity Fixed Income

Asset breakdown as of 12/31/12

*Liquidation portfolios comprise of 12.2% of firm-wide fixed income total.

About PNC

22

EMPLOYEES: More than 56,000 in the U.S. and abroad SIZE BY BRANCHES: 5th largest U.S. bank by branches CUSTOMERS: Approximately 6.5 million checking account customers LOCATIONS: Branches – Approximately 2,900 in 19 states and the District of Columbia ATMS: Approximately 7,300 machines INTERNET ADDRESS: www.pnc.com As of December 31, 2012

PNC US FOOTPRINT (as of 12/31/2012) Retail footprint Additional C&IB offices – plus locations in Canada and the UK

FINANCIAL PERFORMANCE (as of FYE 12/31/2012) § $3 billion in Net Income § $305 billion in Assets § $112 billion Assets Under Management § $213 billion in Deposits § $39 billion Shareholder Equity

Documents

Treasury Strategies’ Quarterly Corporate Cash Briefing€¦ · Sources: Treasury Strategies, Federal Reserve, European Central Bank, Office of National Statistics Note: 1Q 2000