Magazine article American Banker

Cash Management Called Immune to Tough Times

Magazine article American Banker

Cash Management Called Immune to Tough Times

Article excerpt

By Marjanovic, Steven

Whether or not an economic downturn is looming, cash management bankers are confident that their mature but profitable business will keep chugging along.

Loan demand and credit quality may go their cyclical way, but corporations' needs to process incoming remittances, manage cash positions, and move money are never discretionary.

"Payments still need to be made in good times or bad," said Lawrence Forman, cash management analyst at Ernst & Young in New York. "What happens is that the growth rate slows down."

Banks' cash management revenues were $8.7 billion in 1997, up 7.5% from 1996, according to Ernst & Young's recent survey of the industry. It is forecasting another 7% rise for 1998, to $9.4 billion.

Tough times can present growth opportunities. Mr. Forman said corporate treasurers might be more willing to buy additional services such as sweep accounts, or consider moves to reengineertheir operations, such as farming out payables and receivables processing.

"Some banks try to capitalize on the trend of outsourcing treasury functions," Mr. Forman said. "Bad times may push more people into those types of activities"-and the big service providers would get bigger, improving economies of scale.

Meanwhile, there is an untapped market at small end of the business spectrum, where big and small banks alike may see an opening.

James Graham, executive vice president of PNC Bank Corp. …

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