Share of wallet

Published: Jul 2013
Stack of coins

Gavin Jones
Gavin Jones, Vice President, Deputy Treasurer, Ahold:

At Ahold, our relationship bank group is based on the 14 banks participating in our revolving credit facility. To proactively manage that relationship we deploy two tools: a bank performance scorecard and a share-of-wallet calculation. Both are integrated into our six-monthly bank relationship reviews.

Our share-of-wallet calculation focuses on the revenue each bank has earned, broken down by product category, including payments, card and cash management, investments and derivatives, through to the more highly-prized capital markets transactions or merger and acquisition (M&A) advisory. We either calculate the transaction fees actually paid to a bank or, in the absence of a fee, we have used a conservative assumption on what a piece of business is worth. For example, for a money market fund (MMF) investment, we’ll use the asset manager net fees to calculate an actual revenue stream. Whereas for a term deposit, we’ll make an assumption on how much a bank saves by taking our deposit, compared with borrowing the equivalent from the market.

Foreign exchange (FX) and interest rate swaps (IRS) derivatives are product areas where we use a revenue assumption. Our wallet model does not consider profitability, largely, as each bank has very different approaches on what costs and risk-adjusted returns they attach to a specific piece of ancillary business.

The main objective of the wallet is for us to proactively manage the relationship, so we classify banks into three categories: underfed; on target; and overfed, using revenue run rate approach. Critical to this is establishing a revenue target for each bank, so an integral part of the wallet process is having a transparent dialogue with our banks on their revenue expectations. We do this once a year with the relationship managers. Whilst our revenue calculation may not exactly match the banks internal assessment, we typically find we are in the same ball park.

Our share of wallet does provide useful insight in the structure and flexibility of our wallet, which strategically has allowed to shape the size, capability and composition of our bank group to ensure that banks revenue expectations can be serviced. Operationally, using both the model and performance scorecard, we can identify whether an increase or decrease in banks’ revenue can be attributed to a change in the product teams performance. Our relationship managers have reacted positively to the transparency and directional insight we can give, and this year we will be distributing the performance heat maps, so they can visually see how they are performing.

Didier Aandenhaute
Didier Vandenhaute, Director, PwC Treasury Consulting Practice, Belgium:

Over the past few years, banks have increasingly squeezed their corporate clients in order to secure a bigger share of their overall wallet. This has been a way for banks to meet the expected levels of return on capital employed imposed by their own boards. Quite often, corporate entities have not been in a position to provide banks with quantifiable arguments against further wallet sharing or have a constructive dialogue.

In recent years, we have seen corporate entities investing time and money in developing solutions to be able to actively manage wallet sharing, to different degrees of complexity. We have simplified below our view of the market into three categories, taking an incrementally more complex approach to the issue:

  1. Country allocation

    At the most simplistic end of the scale, corporate entities will allocate their business on a country/regional basis and compare the percentage of sales allocated to one bank to its share of the overall credit support provided to the group by all banks (participation in syndicated credit, bilateral committed lines, working capital and trade lines, FX lines, etc).

  2. Balanced allocation

    The corporate entity will go a step further and quantify the value of the wallet allocated to each bank per product (transactional fees, commissions, trade finance fees, etc). They will also actively balance the quantitative elements of the relationship against the quality of the relationship through a balanced scorecard (customer service, in-country support, implementation services and liquidity management). Finally, some corporate entities will use or set up their treasury management system (TMS) in a way that will better enable them to actively track the overall business and fees passing through the banks (using FXall or SAP, for example).

  3. Tactical asset allocation

    In this case, the corporate entity will put themselves as much as possible in their bank’s shoes and try to analyse the value of the relationship from the bank’s point of view. Corporate clients realise that Basel III has an impact on all banks, but in different ways depending on their balance sheet composition. As a result, the same corporate product might be priced differently from one bank to another. Based on these factors, the corporate client will make their own analysis per bank of the overall profitability generated through the relationship, and each product will be allocated to the bank that is best able to manage it, understanding the real value of this asset to each bank (‘golden asset’ management).


If banks are not ready to open their books and share the revenue generated through the relationship and the return on capital employed, corporate clients will have to find ways to estimate their wallet and analyse how to best share it among their core banking partners. The better the corporate entity is able to value its wallet, the better they will be able to establish a longstanding and reciprocal relationship with their bank.

Sander Van Tol
Sander van Tol, Partner, Zanders:

The first division you can make is between direct fees and expenses and indirect ones. The direct fees are something for which you would normally receive an invoice, for example an agreement with the bank for cash management services that they deliver to you. Indirect fees, on the other hand, are those that are earned by the bank when you are, for example, trading derivatives.

This can make it difficult to see the actual fee. If you are depositing money with a bank, normally the bank may take a certain yield on that deposit, so you will assume a number of basis points on that deal. Therefore, the first thing that corporates are looking at is the split between direct and indirect fees.

A deeper analysis would involve not only looking at the gross fees or gross revenue that you pay to the bank, but to also consider the profitability of the revenue for the bank – and that can be very challenging to establish.

Another determinant could be whether the treasurer has a complete overview of all the business done with the banks. For example, if you look at multinationals it is quite difficult to have complete oversight of all the different banking relations, first of all, but also to see what your operating companies are actually doing. What you often see at the operating company level is that there are bilateral contracts between the operating company and the bank which are not known to the treasurer.

There are also contracts with banks which are not within the remit or scope of the treasurer – insurance is one example, but there are a lot of other services offered by banks that make it difficult for the treasurer to get a complete overview. Treasuries that have a more centralised structure can usually achieve a reasonably good overview; but for those who are organised in a more decentralised way, it is much more difficult to assess the total wallet.

The next question:

“When selecting a payroll service provider, what should be included in an RFP?”

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