Category

Capital Allocation

Capital AllocationCash & Working Capital
May 12, 2022

A Treasury Mind Shift: Focusing On Operational Cash

Many treasuries have grown complacent about cash levels, but concerns about a recession are triggering a renewed focus on optimizing the management of working capital.The debate about whether the US economy is headed into a recession because of higher interest rates and the Fed reducing its balance sheet is heating up. While some economists are bullish, many corporate treasuries are not: In a poll last week, 71% of members of NeuGroup for Global Cash and Banking said a recession is…
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Capital AllocationTalking Shop
February 10, 2022

Talking Shop: Optimizing Models for Capital Structure and Allocation

Editor’s note: NeuGroup’s online communities provide members a forum to pose questions and give answers. Talking Shop shares valuable insights from these exchanges, anonymously. This exchange is from NeuGroup for Growth-Tech Treasurers. Member questions: “I am working on optimal target capital structure (debt/equity mix) analysis and framework. Any ideas on approach/model? “I’m also working on creating a capital allocation policy and framework. Any sample allocation policies and framework approach or model ideas would be great.” Peer answer 1: “There are several…
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Capital AllocationTechnology
February 3, 2022

Let’s Get More Strategic: Treasurers’ Top 2022 Priorities

A new NeuGroup survey reveals that treasurers are focused on driving company growth.Treasurers at the world’s leading companies are doubling down on their commitments to expand beyond traditional areas like liquidity management and spend more time in strategic zones. That’s among the key takeaways from the January 2022 NeuGroup Members Agenda Survey. In it, respondents picked their top three objectives from a list of 11. Their answers, shown in the chart above, reveal an emphasis on driving better enterprise financial…
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BankingCapital Allocation
January 19, 2022

Spreading Capital Like Peanut Butter: One Bank’s Allocation Method

An understandable and flexible approach supported by top executives brought business leaders on board.Extensive analysis showed a large regional bank’s share price is highly correlated to consistent return on equity (ROE) performance, prompting its treasury team to set about developing a process to ensure the appropriate ‘E’ was assigned to business units. The treasurer described the bank’s “hybrid” capital allocation approach to peers in a recent meeting. Three “guiding principles” to developing the approach were making sure the aggregated allocated…
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Capital AllocationCash & Working Capital
November 17, 2021

New Wrinkles to Iron Out in Capital Structure Analysis as Fed Resets

Five areas of focus for treasury teams embarking on new analysis of capital structure as the outlook for rates changes.Capital structure analysis has taken on added importance and complexity for corporate treasurers who piled on liquidity to survive the pandemic but are now “skeptical about keeping a large chunk of change around,” as one member put it at a recent meeting of NeuGroup for Large-Cap Treasurers. NeuGroup senior executive advisor Roger Heine, a former investment banker experienced in helping companies…
Justin Jones
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Capital AllocationESG
June 10, 2021

Balancing Act for Energy Firms: ESG vs. Capital Returns, Discipline

More takeaways from a NeuGroup pilot meeting of oil and gas treasurers weighing the role of finance in energy transition strategies, conducted in partnership with Societe Generale.By Joseph NeuOur discussion with oil and gas treasurers validated that there is a strong belief that investors (and especially on the bond side) want capital discipline and not just a commitment to ESG initiatives. ESG mandates are sold as an indicator of strong returns, especially in the long run; so if companies underperform…
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Capital AllocationCapital Markets
May 20, 2021

Back in Fashion, Buybacks Have Corporates Scoping Capital Structure

Many corporates are deciding whether to restart share repurchase plans suspended in 2020.After the pandemic hit, the volume of share repurchases plummeted and what continued was mainly executed by companies managing the top-20 programs in terms of volume, Societe Generale bankers told assistant treasurers at a recent NeuGroup meeting sponsored by the bank. Dividend payouts, meanwhile, stayed relatively steady and were only cut or canceled as a last resort, Societe Generale said (see chart). An increasing number of companies have…
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Capital AllocationInsurance
March 18, 2021

Where Captives Fit in the Insurance Puzzle Corporates Want to Solve

Captives offer tax advantages and flexibility, but treasury teams must make sure trapping cash in them is worth the benefits.Rising insurance costs are putting more focus on captives, a solution that offers tax advantages, flexibility and lower costs than traditional insurance. For those reasons and others, several members at a recent meeting of NeuGroup for Retail Treasury said they plan to expand their captives to cover more risk.Other members say captives are not a good use of capital for their…
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Capital AllocationCapital MarketsCash & Working Capital
March 11, 2021

Do Stock Buybacks Create Value or Just Return Capital to Investors?

Members at companies with excess cash discuss whether share repurchases generate economic value for shareholders.ConocoPhillips on Wednesday announced it is resuming its share repurchase program, citing its “long-standing priority to return greater than 30% of cash from operations to shareholders annually.” The company is not alone: A recent NeuGroup Peer Research Survey showed that 82% of respondents consider the return of excess capital the primary objective of their company’s share repurchase program. Only 9% said creating shareholder value was the…
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BankingCapital AllocationCapital Markets
March 2, 2021

A Third Path for Stock Buybacks: Enhanced Open Market Repurchases

Some NeuGroup members have turned to eOMRs to get the flexibility of OMRs and pricing below VWAP, like ASRs.Many NeuGroup members across groups at recent meetings agreed they have enough excess liquidity and trust in market stability to restart share repurchases; but there has been a range of views about how much emphasis to place on the price per share a corporate pays for its own stock. Where companies fall on the spectrum of answers may determine if they opt…
Justin Jones
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