Investment Banks Out, Investment Bankers In, Survey Finds

Almost a third of CFOs have lost trust in investment banks, according to a Dow Jones/ClientKnowledge survey.

CFOs don't trust investment banks, but they do trust individual bankers, according to a Dow Jones survey of top financial executives. Of more than 220 chief financial officers, treasurers, and heads of mergers and acquisitions and debt capital markets surveyed across 13 global industry sectors, 27% said they had lost trust in banks, mainly due to fear of insolvency. However, survey respondents blamed the actual institutions, not the bankers, and were satisfied with their bankers in all areas ranging from ability to provide analysis to banker support and involvement. The most important factor that respondents considered when choosing a bank was the relationship with the bank and the bank's commitment to the customer.

The survey, titled "Less Love, Less Money: C-Suite Insight for Investment Bankers," was commissioned by Dow Jones Investment Banker's editorial team in conjunction with London-based research and consultancy firm ClientKnowledge, to identify the trends and issues of most importance to corporate finance executives and departments.

Survey respondents ranked J.P. Morgan as their number one investment bank when it comes to providing debt and equity capital markets and mergers and acquisitions. Deutsche Bank closely trailed J.P. Morgan in both debt and equity capital markets while Goldman Sachs was ranked second for mergers and acquisitions.

"Banks may need to be more flexible and provide increasingly tailored services to attract and retain clients," said Adam Smallman, global managing editor for investment banking, Dow Jones, in a press release. "Building a deeper, more knowledgeable relationship with clients may help to bring back trust at the institution level."

Most respondents said accessing capital is easy; however, nearly one third are experiencing difficulties. When analyzed by industry, the responses showed that countercyclical and cash-positive industries are getting more attention. For example, 100% of healthcare responses indicated raising capital is easy, whereas 60% of those in the automobile industry said they are finding it difficult. Additionally, the survey revealed that access to credit is more difficult and, if found, the terms are tougher and transaction fees are on the rise. Sixty-four percent thought that transaction fees have increased, with transaction-based fees representing 56% of the fees charged.

"The lack or high cost of capital is preventing deals getting done in the industries requiring restructuring, such as automobiles," said Justyn Trenner, CEO and principal, ClientKnowledge.

Smallman added, "Greater care for clients includes bankers generating fresh thinking relevant to the specific needs of their clients. This research shows that trust has been lost but it can be earned back."

An overview of these findings can be found on the Dow Jones website.