29th Annual

Cash Management
Services Survey
2012 executive summary

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29th Annual Cash
Management Services Survey

Table of contents
2 Introduction 13 Trade services

4 Summary of key ndings 16 Background and methodology

6 Cash management revenue 17 For more information

11 Sales and personnel issues

1
Introduction

Ernst & Young has conducted the Annual Cash Management

Services (CMS) Survey for the past 29 years. We distributed the
2012 bank peer group prole
2012 questionnaire to previous survey participants and other
top 100 bank holding companies that actively market treasury Peer 1
services to wholesale customers in the United States. Survey
Assets: More than US$87 billion
participation is generally limited to commercial banks, but we
invite thrifts to respond when we become aware that they provide Respondents: 20
treasury services. We also ask a small number of non-bank lockbox
providers to participate in the survey to help us understand how Peer 2
outsourcing impacts bank lockbox volume. Assets: US$13.4 billion to US$87 billion

The 2012 CMS Survey collected data from 48 organizations Respondents: 19

comprising 45 financial institutions and 3 non-banks. The Peer 3
2012 survey participants included all of the 2011 survey
Assets: Less than US$13.4 billion
respondents plus four additional banks. Iberiabank Corporation
and MB Financial were first-time respondents in 2012, while Respondents: 6
Huntington Bancshares and UMB Financial Corporation returned
to the survey after a two-year absence. Two survey participants
broadened the scope of their response in 2012 to include
acquisitions. The former Marshall & Ilsley Corporation was included
with Harris Corporation in the BMO Harris Bank response and
Whitney National Bank combined its data with Hancock Bank in the
Hancock Holding Company questionnaire. The 2012 participants
included all of the top 20 financial institutions (measured by assets)
invited to respond and 78% of the top 50.

All targeted financial institutions were segmented into three

peer groups based on their US assets. The 20 largest financial
institutions were assigned to the first peer group (Peer 1). The
next 19 banks, in asset order, were placed in the second group
(Peer 2). The final six banks, with assets less than US$13.4 billion,
were assigned to the third group (Peer 3). The 2011 participant
list contains virtually all of the nationally recognized cash
management providers.

2
2012 participant list by peer group
Peer group 1
More than US$87 billion in assets
Bank of America Corporation
Bank of New York Mellon Corporation
BB&T Corporation
BMO Harris Bank, N.A.
Capital One, N.A.
Citibank, N.A.
Deutsche Bank
Fifth Third Bancorp
HSBC Bank USA
JPMorgan Chase & Co.
KeyCorp
Northern Trust Corporation
PNC Financial Services Group, Inc.
RBS Citizens Financial Group
Regions Financial Corporation
SunTrust Banks, Inc.
TD Bank, N.A.
Union Bank
U.S. Bancorp
Wells Fargo and Company
Peer group 3
Less than US$13.4 billion in assets
Eastern Bank
First Midwest Bank
Iberiabank Corporation
MB Financial, Inc.
Northwest Bancshares, Inc.
PrivateBancorp, Inc.
Peer group 2
US$13.4 billion to US$87 billion in assets
Associated Bank
Bank of the West
BBVA Compass
BOK Financial Corporation
City National Corporation
Comerica Incorporated
Commerce Bancshares, Inc.
Cullen/Frost Bankers, Inc.
First Citizens Bankshares
First Horizon National Corporation
First National Bank of Omaha
Hancock Holding Company
Huntington Bancshares
M&T Bank Corporation
Sovereign Bank, N.A.
Synovus Financial Corporation
UMB Financial Corporation
Webster Financial Services
Zions Bancorporation
Peer group 4
Non-banks
ACS, A Xerox Company
Fiserv, Inc.
TransCentra, Inc.
3
Summary
of key ndings
Continued progress
Measured cash management fee-equivalent revenue grew by 1.5% in 2011. This was
a step up from the 0.5% increase recorded for 2010. A number of factors continue to
hamper stronger growth, but there were positive developments. 2011 was the first year
when the five electronic product areas automated clearing house (ACH), electronic
data interchange (EDI), information reporting, purchasing cards and wire transfer
contributed 50% of measured fee-equivalent revenue. Just five years ago, in 2006, these
five products accounted for less than 40% of total revenue. With electronic products
beginning to dominate, the continued acceleration of revenue growth is more likely to be
sustained as the bottom-line impact of shrinking paper-based revenues has a diminished
influence over the aggregate total.

8%
Fee-equivalent cash
6.5%
6.0%
management revenue growth
6% 5.5%

4.0%
4% 3.5%
3.0%

2% 1.5% 1.5%

0.5% 0.5%
-0.5% 0%
0%

-2% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
estimate

The two most prominent external impediments to faster cash management revenue
growth are well-known and interrelated. The first, the lack of a sustained and robust
economic recovery, inhibits growth in transaction volumes and new customers. The
second, the accompanying super-low interest rates, degrades the value of customers
balances, thereby raising hard-dollar fees.

In troubled times, all expense items draw greater scrutiny, and as cash management
has become more of a fee-based business, it has been subjected to customer cost-
reduction efforts. Low rates have also reduced the numbers of sweep accounts and
their associated monthly fees.

29th Annual Cash Management Services Survey: 2012 executive summary 4

Summary
of key ndings

The principal internal impediment to faster growth is the drag created by the The 2012 surveys
deterioration of paper-based revenue. Revenue declines in clearing paper-based checks
and controlled and general disbursement services eat into any revenue gains from all-bank average pretax
electronic and card payments. However, the positive consequence of fewer paper-based profit margin for treasury
payments has been growth in electronic payments and increased profit margins. The
2012 surveys all-bank average pretax profit margin for treasury services was 45%. This services was 45%.
was a clear improvement over the mean 41% profit margin recorded in the 2011 survey.

The respondents forecast 3.5% revenue growth in 2012. We also anticipate continued
improvement, but expect to see a slightly more modest growth rate of 2.5% or perhaps
3.0% this year.

Six products report growth

Six product categories were able to deliver revenue growth in 2011, up from five
in 2010. Purchasing cards led, with 11% growth in 2011, and now account for an
impressive 15% of all measured revenue. In second place was wire transfer, improving
upon its 4.5% growth in 2010 with a 6% increase in 2011. Wire transfer contributed
17.5% of total 2011 revenue. ACH revenue grew 4% while EDI was up by only 2%.
After a minor 0.5% decrease in 2010, information reporting revenue was up 1.5% in
2011. Similarly, account reconciliation also moved into positive territory in 2011 with
0.5% growth after a 1.0% decline in 2010.

Wholesale lockbox reported weaker results in 2011 with a modest drop of 0.5%, and coin
and currency revenue also suffered a small decline of 1.0%. The four remaining products
also lost ground in 2011, but their rates of revenue deterioration were less severe than
in 2010. Retail lockbox fell by 2.5%, and the demand deposit account (DDA) category,
which includes sweep fees, was down 3.0%. Finally, check clearing and controlled
disbursement were down 6.0% and 7.0%, respectively. For more details see the cash
management revenue chapter.

Trade services survey results

The 2012 trade services survey received completed questionnaires from 21 banks,
including 11 responses from members of Peer 1 and 10 banks in Peer 2. The
participants reported fee-equivalent trade services revenue at US$3.4 billion. For more
details, read the trade services chapter.

29th Annual Cash Management Services Survey: 2012 executive summary 5

Cash
management
revenue
More revenue growth On an individual basis,
Cash management revenue growth is highly dependent upon growth in the overall
each of the top five banks
economy. More economic activity generates more payments. Consistent with the
economic malaise the United States has endured since late 2008, the cash management reported a revenue gain
business reported no revenue growth in 2009 and only a paltry 0.5% increase in 2010.
in 2011.
In the 2011 report, we put a positive spin on this minimal growth, noting that at least
the business was on an upward trajectory.

Last years survey respondents predicted further improvement and forecast 2.5%
growth in 2011. While we also anticipated an advance in 2011, we believed revenue
growth would fall short of the respondents goal. In fact, the current survey results for
2011 indicated incremental progress, with a 1.5% rise in revenue. Given the stop-start
nature of this under-performing recovery, even this relatively small increase should
be appreciated.

An optimistic forecast for 2012

The survey participants predicted 3.5% revenue growth for 2012. This is an ambitious
goal. While there are some bright spots in cash management, a number of internal and
external constraints make this strong a rebound questionable. The sputtering economy is
unlikely to generate much in the way of an increase in transaction volumes. Low interest
rates have evolved from a short-term hindrance into a longer-term reality in the new
normal. The cash management sales force can cite numerous benefits derived from the
use of various treasury products and services, but the time-value of money has had to
drop to near the bottom of the list. The multi-year revenue declines seen in paper-based
cash management products may be gradually getting less severe, but the migration from
paper to electronic payments continues to bleed dollars. Even with this challenging set
of circumstances, we also see some room for improvement. However, our expectations
are more modest than 3.5% growth. An increase of 2.5% or perhaps 3.0% in 2012 seems
more plausible.

Growth by bank segments

The CMS Survey makes an effort to measure each segment or bank peer groups revenue
growth rate on a same-bank basis (i.e., discounting revenue gains associated with
acquiring other banks). The top five cash management providers reported 2% growth
in 2011, falling just shy of their prediction last year of a 2.5% increase. On an individual
basis, each of the top five banks reported a revenue gain in 2011. The 2011 forecast
made by the other 15 members of Peer 1 had been in line with that of the top five, also
anticipating 2.5% revenue growth. However, these 15 Peer 1 banks collectively produced
a scant 1% gain in 2011. Seven banks in this group reported revenue declines in 2011.

29th Annual Cash Management Services Survey: 2012 executive summary 6

Cash
management
revenue

The remaining banks surveyed, Peers 2 and 3, turned in 1.5% revenue growth in How was revenue measured?
2011. Only four of the 25 banks in Peers 2 and 3 reported a revenue decline. In the
The 2012 CMS Survey collected banks fee-
previous survey, the banks outside the top 20 joined the Peer 1 banks in anticipating
equivalent cash management revenue for the
2.5% growth in 2011. last two completed calendar years (2010 and
2011), enabling us to calculate both revenue
While each of the three segments failed to meet its forecast for 2011, it should be growth and the overall size of the business
noted that every segment improved upon its 2010 performance. Looking forward, as for the top 100 banks. Our methodology
the accompanying chart indicates, both the top five banks and the other 15 in Peer 1 includes estimating the revenue of non-
forecast 3.5% revenue growth in 2012. Peers 2 and 3 set a slightly more modest goal, respondents based either on their previously
received data or on data from their peers.
calling for a 2.5% increase.
Respondents were also asked to provide a
revenue estimate for 2012, the current year.
Fee-equivalent cash management revenue growth by The questionnaire asked participants to
bank segment include only fee-equivalent revenue from
their cash and treasury management
customers. These encompass corporations,
8%
the middle market, small businesses,
government, correspondents and other
6%
non-retail customers on account analyses
that allocate revenue to the products and
4.0% services used. Fee-equivalent revenue
4% 3.5% includes service charges and penalty fees
3.0% (e.g., per-item charges for overdrafts),
2.0% 1.5% 2.5%
1.0% regardless of whether payment was made
2% 0.5% via compensating balances or fees. However,
-2.0% 0.5% income earned from excess balances, float
0% 0% and the spread between the customers rate
0%
(e.g., earnings credit rate or sweep account
rate) and the banks actual investment rate
-2%
was excluded, as were rate-based charges for
2008 2009 2010 2011 2012 negative balances.
estimate
The specific products and services included
were account reconciliation, ACH and
Top ve providers Other 15 in Peer 1 Peers 2 and 3
EDI, controlled disbursement, information
reporting, retail and wholesale lockbox,
check clearing (including remote deposit),
coin and currency services, wire transfer,
2011 fee-equivalent revenue of US$16.25 billion purchasing cards and the DDA category.
The 2012 CMS Survey asked respondent banks for revenue from the last two DDA included fee income from general
completed calendar years, 2010 and 2011, along with an estimate for 2012. This disbursement activity, account maintenance,
statement services, zero-balance accounts
allows respondents to adjust their previously reported totals for 2010 to reflect recent
and non-interest-related overdraft and sweep
mergers, acquisitions or changes in methodology. Fee-equivalent revenue in 2010 for account charges.
the top 100 banks was measured at US$16.00 billion, and with the 1.5% increase in
2011, revenue reached US$16.25 billion. If the respondent forecast for 3.5% growth Measured purchasing card revenue
comprised all associated fee-based revenue,
in 2012 is realized, total fee-equivalent revenue will be about US$16.80 billion.
including penalty fees for late payments,
even if some portion of this revenue was
shared with other areas of the bank or an
Paltry growth in non-fee income outside vendor. Respondents were asked to
Beginning in 2003, to supplement our fee-equivalent measure, we asked respondents exclude any revenue returned to customers
to share their domestic cash management revenue derived from the products (i.e., rebates or waivers), card association
fees or any revenue derived from interest
captured by the CMS Survey, including revenue from excess balances, float and spread
payments. Finally, respondents were
income that is allocated to treasury services. All of the top five providers and about instructed not to deduct the cost of funds.
half of the other respondents provided this data in the 2012 survey. Based on those
answers and our approximations for the non-responding banks, we estimate that total

29th Annual Cash Management Services Survey: 2012 executive summary 7

Cash
management
revenue

cash management revenue for the top 100 banks for 2011 was about US$30.60 billion.
Fee-equivalent revenue, measured at US$16.25 billion, provided about 53% of the total.
Float, spread and excess-balance income added the remaining 47%, contributing about
US$14.35 billion.
Share of 2011
The US$30.60 billion total measured for 2011 was a 1.0% increase over the 2010 fee-equivalent revenue
total of US$30.30 billion. Non-fee revenue derived from float, spread and excess-
balance income increased by less than 0.5%, growing from US$14.30 billion in 2010 to
US$14.35 billion in 2011. The vast majority of the growth (US$250 million) came from Peers
2 and 3
fee-equivalent revenue. 12.0%

Other
15 providers
Share of revenue by bank segment Top
5 providers
in Peer 1
26.0%
The top five cash management banks reported having a 62.0% share of the revenue 62.0%

measured in 2011, unchanged from 2010. The share of the other 15 banks in Peer 1
increased slightly from 25.5% to 26.0%, while the share for Peers 2 and 3 declined from
12.5% in 2010 to 12.0% in 2011. Changes in market share among the surveys bank
segments may be influenced by several factors, including disparate revenue growth
rates, changes in group membership (due to changes in asset rank or mergers and
acquisitions) and restatements of revenue numbers. Mergers and acquisitions played a
significant role in this years changes.

Revenue from customer segments

The CMS Survey asked respondents to indicate what portion of their cash management
revenue came from each of the five pre-listed customer groups. In the accompanying
table, the total line was derived by weighing each bank groups data by its relative
contribution to total revenue.

Large Middle Small Financial Government Share of fee-equivalent revenue

corporate market business institution and nonprot by customer segment
Top 5 29% 27% 13% 15% 16%

Next 15 26% 32% 18% 15% 9%

Peers 2 & 3 13% 40% 35% 3% 9%

2011 Total 26% 30% 17% 14% 13%

2010 Total 25% 32% 19% 14% 10%

2009 Total 27% 27% 19% 15% 12%
2008 Total 28% 27% 21% 13% 11%

In total, the respondents reported that 26% of their 2011 revenue came from large
corporations, defined as firms having more than US$250 million in annual sales. The
middle market (firms with US$50 million to US$250 million in sales) continued to be the
biggest segment, contributing 30%, while small business (firms with less than US$50
million in sales) accounted for 17%. Financial institutions (other banks, thrifts and

29th Annual Cash Management Services Survey: 2012 executive summary 8

Cash
management
revenue

credit unions) and the government and nonprofit sector were the smallest segments,
responsible for 14% and 13%, respectively, of 2011 revenue.

Compared with the results for 2010, there were several noteworthy changes. The share
of revenue from middle-market customers fell from 32% to 30%, and the small business
segment dropped from a 19% share to 17%. Offsetting these declines were growth in the
large corporate sector, from 25% to 26%, while government and nonprofit customers
share jumped from 10% to 13%. The percentage of revenue from financial institutions
was unchanged at 14%.

In last years report, we noted that apparent changes in reporting methodology by

several major players contributed to the large jump in the 2010 share of middle market
revenue and that this increase might be overstated. When we examine the multi-year
trends in the accompanying table, it does appear that the size of the middle market
in 2010 may have been exaggerated while the government and nonprofit sector was
under-represented.

Revenue growth by product line

Six of 12 product areas the survey measured had some level of revenue growth in 2011.
Purchasing cards (P Card) turned in another strong year with an 11% increase, followed
by wire transfer (Wire) with 6% growth. The combination of ACH and EDI revenue grew
3.5%. Individually, ACH was up 4% while EDI gained only 2%. The final two products to
eke out an increase were information reporting (Info.) with 1.5% revenue growth and
account reconciliation (ARP), up 0.5%.

Revenue growth rates for

15%
cash management products
11.0% during 2011
10%

6.0%
5%
3.5%
1.5%
0.5% -0.5% -1.0% -2.5% -3.0% -6.0% -7.0%
0%

-5%

-10%

P Card Wire ACH/EDI Info. ARP WLBX C&C RLBX DDA Check CDA

Wholesale lockbox (WLBX) and coin and currency (C&C) reported minor revenue dips
of -0.5% and -1.0%, respectively. Retail lockbox revenue decreased by 2.5% in 2011,
and DDA revenue dropped 3.0%. As was the case in 2010, the biggest losses were
seen in check clearing (Check) and controlled disbursement (CDA), down 6.0% and
7.0%, respectively.

29th Annual Cash Management Services Survey: 2012 executive summary 9

Cash
management
revenue

Share of 2011 revenue by product 2011 cash management revenue

The two product areas that increased their share of measured fee-equivalent revenue
by product
were purchasing cards and wire transfer. Purchasing card revenue expanded from a
13.0% share in 2010 to 15% in 2011. Wire transfer increased its 17.0% share in 2010 RLBX ARP
CDA
to 17.5% in 2011. 1.5% 3.5%
1.5% C&C
WLBX
6.5%
Check
Five areas saw their share of total fee-equivalent revenue decline. The revenue erosion 9.5%
in check clearing brought this product area from a 7.0% share in 2010 to 6.5% in 2011. 6.5%
DDA
Wholesale lockbox, whose share in 2010 was 10%, fell to 9.5%. Retail lockbox slipped 21.0%
P Card 15.0%
from 2.0% in 2010 to 1.5% in 2011. Controlled disbursements share also fell to 1.5%,
after recording a 2.0% share in 2010. Finally, coin and currency, with 7% of revenue in
8.0%
2010, dropped to 6.5% in 2011. 17.5%
ACH/EDI 9.5%

Wire
The remaining four areas maintained their share of revenue. DDAs share was unchanged El
ec Info.
at 21.0%. Information reporting accounted for a 9.5% share and ACH/EDI continued to t ro
nic
p ro d u c t s
contribute 8% of the total. Lastly, account reconciliation was also unchanged, adding
3.5% of revenue.

The CMS Survey collects domestic cash management revenue, with the exception of the
cross-border components of wire transfer, ACH, EDI and remote capture. Wire transfer
revenue includes all revenue associated with same-day US dollar transfers between US
and foreign locations and within the United States (excluding revenue from transfers
between two non-US locations). A small portion of ACH, EDI and remote deposit
revenues were from cross-border payments.

29th Annual Cash Management Services Survey: 2012 executive summary 10

Sales and
personnel issues
Slight decrease in sales personnel and increase in
product management
We asked banks to report how many of their treasury services or cash management
personnel were assigned to each of several pre-listed functional categories. To facilitate
consistent responses, the questionnaire stated that technical sales specialists should
be included within sales, product development teams should be placed in product
management and customer implementation personnel should be considered customer
service. We also asked that operations personnel be excluded unless they were customer
service personnel. The accompanying table displays the percentage of personnel
assigned to each functional area by peer group. The all others category includes
market research and planning, consulting and administration. The table reflects the
actual number of full-time personnel reported by the responding banks. As a result, the
biggest banks in Peer 1 had a large impact on the all banks percentages at the bottom.

Product Customer All Portion of cash management

Sales management service others personnel assigned to
functional areas
Peer 1 32% 12% 46% 10%

Peer 2 43% 15% 36% 6%

Peer 3 55% 15% 29% 1%

All banks 34% 13% 44% 9%

Forty-four percent of all treasury personnel were in customer service roles. This
percentage was unchanged from the 2011 survey. The percentage of sales personnel
decreased from 36% in 2011 to 34% this year. Product management personnel increased
slightly, from 12% in 2011 to 13% in 2012, as did the all others category, rising from
8% in 2011 to 9% this year.

Each of the three peer groups continued to have a distinctive distribution of personnel.
The top 20 banks typically have more personnel in customer service, while smaller
institutions assign more people to a sales role. We believe sales personnel in the smaller
banks (i.e., Peers 2 and 3) often perform some customer service functions, and this
may be part of the reason for the disparity. Another factor to consider is that customer
implementations or on-boarding at big banks is likely to be more complex for larger
clients, thereby requiring additional implementation personnel within customer service.

29th Annual Cash Management Services Survey: 2012 executive summary 11

Sales and
personnel issues

More commonality was seen in the percentage of personnel in product management.

The variation among peer groups was relatively small, with product management
accounting for 12% of personnel in Peer 1 and 15% in Peers 2 and 3.

Sales commissions and bonuses

Nearly all responding banks (96%) offered sales incentives (i.e., bonuses or commissions)
to their cash management sales force. Plan payouts were most frequently based on
a combination of individual and group performance (74%). The remaining 26% based
incentive payouts solely on individual performance.

On average, incentive pay accounted for 21% of total compensation, unchanged from
the 2011 survey. Among the respondents with incentive plans, bonus plans were more
than twice as prevalent as commission plans. Only three banks offered both bonuses and
a commission plan for their cash management sales force.

Credit relationships and cash management

We asked banks to estimate the percentage of their cash management customers that
also had credit relationships with the banks. The accompanying table displays the results
by peer group for the three wholesale customer segments on which we collected data:
large corporations, the middle market and small businesses. As was the case in previous
surveys, a higher percentage of middle-market cash management customers also have
credit relationships with the banks.

Large corporations Middle market Small businesses Mean percentage of cash

management clients that also
Peer 1 54% 64% 53%
have a credit relationship
Peer 2 36% 57% 44%

Peer 3 NA* 84% 48%

*NA = Not applicable: only one Peer 3 bank answered.

Electronic bank account management (eBAM)

We added several new questions to the 2012 survey to gauge the progress banks were
making in offering electronic bank account management (eBAM) tools to their wholesale
customers. Only five banks, all in Peer 1, said they currently offered an eBAM solution,
and just two additional banks planned to begin offering eBam sometime later in 2012.

All five banks currently providing eBAM services said their offering included the ability
to open bank accounts. Only three banks were currently able to close accounts or
handle signer maintenance via their eBAM service. All five said their eBAM solution was
web-based, and two banks could also provide this service host-to-host. Four of the five
reported that their eBAM solution used ISO 20022 standard messaging.

29th Annual Cash Management Services Survey: 2012 executive summary 12

Trade services
Fourth annual survey
We launched the trade services survey as an addendum to our regular cash management
research back in 2009. The trade services survey questionnaire is distributed to the
same banks that receive the CMS Survey. This year, we collected responses from 21
banks, up from 18 in 2011. The table below lists the 11 participants in Peer 1 (banks
with more than US$87.0 billion in assets) and the 10 respondents in Peer 2 (banks with
between US$13.4 billion and US$87.0 billion in assets).

Peer 1 Peer 2 Trade survey respondents

Bank of America Corporation
Capital One Financial Corp
Citibank, N.A.
Fifth Third Bancorp
JPMorgan Chase & Co.
KeyCorp
PNC Financial Services Group, Inc.
SunTrust Banks, Inc.
Union Bank
U.S. Bancorp
Wells Fargo and Company
BBVA Compass by peer group
City National Corporation
Comerica Incorporated
Commerce Bancshares, Inc.
Cullen/Frost Bankers, Inc.
First Citizens Bancshares
First National Bank of Omaha
M&T Bank Corporation
Sovereign Bank, N.A.
Webster Financial Services

Reported trade services revenue of US$3.40 billion

We asked the respondents to record their organizations total fee-based revenue
from trade services performed in 2011, excluding any waivers or rebates returned
to customers. The questionnaire requested that only fee income from trade services
booked in the US and performed for wholesale customers should be included. Twenty of
the 21 participants provided a revenue number. The total US-booked fee-based revenue
reported was US$3.40 billion. Please note that this total represents only the numbers
collected from the respondents and is not an attempt to take into account the revenue of
non-respondents.

29th Annual Cash Management Services Survey: 2012 executive summary 13

Trade
services

Share of revenue from standby letters of credit dropped

Data from previous trade services surveys, along with conversations with respondents,
have established that standby letters of credit (LCs) were a principal source of revenue
within trade services. To quantify their importance, we asked for a breakout of revenue
derived from standby LCs. In 2011, standby LC revenue totaled US$2.86 billion, or 84%
of the total fee-based revenue collected for trade services. This represented a decline in
share relative to the 87% of revenue from standby LCs measured for 2010.

Revenue up only 3% in 2011

Sixteen of the 21 respondents to the current trade services survey also participated in
the previous year, enabling us to compare the 2010 and 2011 revenue totals among this
subset of respondents. The 16 banks included 10 banks in Peer 1 and 6 banks in Peer 2.
Based on this comparison, we estimated that trade services revenue increased by only
3% in 2011. This represented a drastic deceleration relative to the 15% revenue growth
measured in last years survey for 2010.

30% Trade services

25.0% Revenue growth rates

20%
15.0%

10%

3.0%

0%
2009 2010 2011

-10%

Decline in transactions
We also compared the annual number of transactions and the total dollar value of
transactions among the respondents that participated in both the 2011 and 2012
surveys. We observed a broadly based 5% decline in the overall number of trade services
transactions. Sixty-three percent of the banks providing data for both years reported
fewer transactions.

Among the banks that responded to the 2011 and 2012 surveys, the dollar value of
trade transactions grew by 20% in 2011. This was reminiscent of the 22% increase in
dollar value measured for 2010. Slightly more than two-thirds of the banks providing
data for 2010 and 2011 reported an increase in the value of their trade transactions.

29th Annual Cash Management Services Survey: 2012 executive summary 14

Trade
services

Revenue from customer segments

To provide insight into the relative importance of various customer segments, we asked
for the approximate percentage of trade services revenue that came from each of five
pre-listed groups in the previous year. Large corporate customers were the source of
47% of the fee-based revenue in 2011 while middle-market clients contributed 32%.
Small business clients accounted for 9%, and the government and nonprofit sector
represented just 4% of revenue. Other financial institutions contributed 8% of revenue.

Supply-chain nancing
Twelve of the 21 respondents (57%) said they offered some type of supply-chain
financing to their customers. Six banks offered both trade-receivables and purchase-
order financing. Another four provided only trade-receivables financing while the last
two offered only purchase-order financing.

29th Annual Cash Management Services Survey: 2012 executive summary 15

Background
and methodology
The Cash Management Services Survey is a survey of the US cash management business performed annually
by the Ernst & Young Cash Management practice. We mailed the 2012 questionnaire in January 2012 to the
top 100 US commercial bank holding companies that offer and actively market cash management or treasury
services to their wholesale customers. A few thrifts that provide commercial cash management services and a
handful of non-bank lockbox vendors were also sent the questionnaire.

We collected annual fee-equivalent revenue from the financial institutions and requested volume, product
feature and pricing data from all respondents. For some product areas, we also requested the number of
accounts and, in the case of sweep accounts, average daily balances. When prices were collected, we generally
used a market-basket approach, obtaining the total fee for the group of charge codes required to perform an
application. The survey gathered information on the cash management products and services listed below.

Account reconciliation Information reporting

Automated clearing house Payroll cards
Check clearing Purchasing cards
Coin and currency Retail lockbox
Controlled disbursement Sweep accounts
Demand deposit accounts Wholesale lockbox
Electronic data interchange Wire transfer

Upon receipt of the completed questionnaires, Ernst & Youngs Cash Management practice reviewed the data in
comparison with prior years responses and other participants answers. Many participants were contacted to
obtain clarifications. After this review, responses were entered into the CMS database.

The questionnaire requested 2010 and 2011 total fee-equivalent revenue, as well as revenue by product, to
enable us to create estimates for the top 100 banks. The process included approximating the revenue of non-
respondents based on their asset size or prior data they may have submitted. We were also able to calculate
the respondents forecast for the current year by using their estimated 2012 revenue. Volume and pricing
trend analyses were performed by comparing prior-year and current-year data among banks that responded in
both 2011 and 2012. This process was made possible by the continued participation of most major banks over
many years.

29th Annual Cash Management Services Survey: 2012 executive summary 16

For more
information
All 2012 CMS Survey respondents receive a more complete participant report in consideration of their
participation and assistance. Participating organizations may also purchase a ranking report. In addition to the
CMS Survey, the Ernst & Young Cash Management practice assists financial institutions in reducing their non-
earning assets and in enhancing revenue. The practice also helps corporations establish, maintain and improve
their cash management systems. For more information on the CMS Survey or our Cash Management practices
capabilities, please visit our website, www.ey.com or contact:

New York
CMS Survey Director
Larry Forman, CCM +1 212 773 1111 lawrence.forman@ey.com

Kansas City
Executive Director Cash Management
Alan Zimmerman, CCM +1 816 480 5317 alan.zimmerman@ey.com

CMS Survey ranking report

The CMS Survey ranking report provides your organizations national rank among the participants for most of
the cash management services included in the survey. Product ranks, typically based on transaction volumes,
and percentage of market share are presented, along with the total volume for all respondents. The top 10
volumes collected for each product category are listed in the report, and the names of the top 10 providers are
printed alphabetically. The ranking report is helpful in evaluating your market position across products. Banks
may cite their Ernst & Young rankings in marketing material and in responses to RFPs.

The price for the 2012 CMS Survey ranking report is US$31,000. Ranking data from the 2012 trade services
survey is also available for an additional US$3,000 when purchased in conjunction with the 2012 CMS Survey
ranking report, or for US$5,000 when purchased separately. For more information about cash management
market research and the ranking report, contact Larry Forman at +1 212 773 1111 or by email at
lawrence.forman@ey.com.

29th Annual Cash Management Services Survey: 2012 executive summary 17

Ernst & Young
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