VideoWhen it's time to raise money, CFOs find it hard to ignore the muscle that global banks bring to the task. Last year, they made U.S.-based Citigroup the largest underwriter of corporate debt not just in its home country, but around the world. In Europe, they tapped U.S.-based investment bank Morgan Stanley more often than any European institution to underwrite equity and equity-related offerings across the continent.
"Global banks are powerhouses in raising capital," says Phoebe Wood, executive vice president and CFO for $2.3 billion Brown-Forman Corp., which markets wines and spirits in more than 130 countries. Earlier this year, Louisville, Kentucky-based Brown-Forman was part of an investor group contemplating the acquisition of U.K.-based wine and spirits company Allied Domecq PLC. While the group ultimately decided against the deal, Wood credits global banks — in this case, Bank of America and Citigroup — with making it possible to consider the bid by agreeing to commit a large amount of capital in a very short period of time. Those two banks backed the whole credit facility for purposes of the bid and would have syndicated the deal had it been successful.
Bob Druskin, president and CEO of Citigroup's global corporate and investment banking group, says that after more than a decade of talk, global banking is finally a reality. "Products and services move freely around the world, money moves freely, trader barriers are coming down," Druskin says. "All the talk about globality 10 years ago has come to fruition." Tim Arnoult, president of global treasury services at Bank of America, is similarly sanguine. "Global banking is more than a marketing pitch," he says. "It is something we execute on every day."
Well, sure — in some arenas. But even as Arnoult credits Bank of America with being able to meet the cash-management, investment-banking, credit, and capital-raising needs of its multinational customers around the globe, he also confirms that the bank's global resources are really focused on four parts of the world: North America, Europe, Asia, and Latin America. Elsewhere, he says, the bank relies on partnerships with nonaffiliated local banks to provide a "seamless" solution for its clients. To one degree or another, so do all global banks. But not every corporate finance executive is keen on that strategy, even in countries where restrictive local banking regulations make it necessary.
"It makes us a little queasy, because we're not dealing just with the bank we have a relationship with, but with their partner as well," says Gary Barth, assistant treasurer at $36.6 billion global delivery giant United Parcel Service Inc. (UPS) in Atlanta. "We prefer to do business with banks that have their own bricks and mortar. I know I have leverage over my bank. I don't always have it over their partner."
David Blair, treasurer for the Asian operations of $39.6 billion Finnish cell phone manufacturer Nokia Corp., agrees. "When things start to go wrong, who's really holding the baby?" he says. "Technically, the systems work. I'm not worried about that. It's when we send a payment close to the cutoff time that somehow just doesn't get executed. Who's going to take the rap? A lot of the time, we end up with the problem."
More surprising to some treasurers is that even when banks have a physical presence in some far-flung location, customers don't always get access to the same services and systems available in their own backyard. John Weisenseel, senior vice president and treasurer at $5.3 billion McGraw-Hill Cos. in New York, uses three global banks for the majority of its cash-management needs: Citigroup in Latin America, U.S.-based JPMorgan Chase & Co. in Asia, and Germany's Deutsche Bank in Europe and the United States. In general, he applauds their service. Still, Weisenseel says, "the cash-management platforms offered by these banks are meant to be global, meaning you are able to take them and use them anywhere in the world. But we've found that with some of them, you can't. For example, when you look at Deutsche Bank, they're using three cash-management platforms — one for Spain, one for the rest of Europe, and one for the United States. They're all different and require different log-ons, different passwords, and different smart cards. It makes things a little more complicated than what you would expect. That has been a disappointment."
In addition to requiring treasury staff to be trained on different platforms, Weisenseel says the multiple platforms create other burdens for McGraw-Hill's IT staff. "The more modules you're using, the more apt you are to have a hiccup," he says.
Deutsche Bank isn't the only bank that sometimes induces hiccups at McGraw-Hill. The publisher's employees use corporate credit cards issued by Citigroup. In Mexico, Citigroup has chosen to issue some of those cards through Grupo Financiero Banamex, a locally popular financial services firm it acquired in 2001. Weisenseel says some McGraw-Hill employees have had their Banamex cards declined during whirlwind, multicountry travel days across Latin America after the bank's antifraud systems calculated that nobody could be making charges in three countries in one day.
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