BankingInsights NewsletterUncategorized
October 9, 2019

CECL to Reshape Credit Products

As new rules on how banks account for credit losses approach at the start of next year, corporate borrowers may want to start asking their lenders how their loans and other credits may be affected. The Financial Accounting Standards Board’s Current Expected Credit Loss (CECL) standard, which becomes effective Jan. 1, requires banks to recognize on day one the losses expected over the life of their credit products. Several banks, including JPMorgan Chase, Citigroup, Discover Bank and Synchrony Financial have…
Insights NewsletterUncategorized
October 3, 2019

Low Rates Deliver an Early Christmas

Corporates issuing debt at rock-bottom rates exult after reaping major savings. “Sometimes the market gives you a gift,” exclaimed one treasurer at a recent NeuGroup meeting while recapping highlights from the last few months. In this case, the gift came in the form of $300 million in net present value savings after the company took advantage of the late-summer swoon in interest rates. The company cashed in by calling—at par—30-year-bonds yielding 4.2% and replacing them with debt yielding 3.1%. And yes, the timing…
Insights NewsletterTreasury ManagementUncategorized
October 1, 2019

Strategic Finance Leaders to Overtake Career Treasurers in Talent Race

In the race toward the future of finance, should talent development programs be molding leaders for general finance, separate from specialist functions like treasury? Our talent-themed treasurers’ meeting last week at the University of Washington’s Foster School of Business revealed a deepening fault line between treasurers who are part of strategic finance leadership rotations and those who are career treasury.  It also showed that more rotational programs designed to foster talent and develop future finance leaders will include specialist (read:…
Insights NewsletterUncategorized
September 26, 2019

Can the Great Libor Migration Happen?

Trillions of US dollars need to start referencing SOFR, the Fed’s new overnight funding rate, very soon. Can the market handle it? Does it want to? Presentations at several NeuGroup meetings in the last few weeks have delved into those questions and the likely demise of Libor.  In just a few short years – possibly by the end of 2021 – the London Interbank Offered Rate, otherwise known as Libor, may cease to exist. This means that almost $200 trillion…
Insights NewsletterUncategorized
September 24, 2019

The Downside of Precision, the Hulk Inside Life Sciences and Thinking Cash, Cash, Cash

Three takeaways from 2019 H1 peer group meetings selected by NeuGroup founder Joseph Neu. Here are three insights that stood that stood out to me from our first half meetings: Sometimes precision works against you. Too much precision can muddle the early stages of assessing risk. When pursuing the first steps, risk professionals may want to look past their desire to employ precise information and start instead with ballpark estimates.  “As you get more precise, the culture of some companies or groups…
Insights NewsletterUncategorized
September 24, 2019

Different Views on the SOFR-Libor Waiting Game

“Never put off till tomorrow what may be done day after tomorrow just as well.”  That cheeky line from Mark Twain turns on its head conventional wisdom on taking action. It also might apply to how some treasury teams are approaching preparation for Libor’s demise. And there are other variations on the “what, me worry?” theme. One participant at a recent NeuGroup meeting of cash investment managers said, with a smile on her face, “We’re not worried about Libor; someone will figure it out.…
Capital MarketsInsights NewsletterUncategorized
September 19, 2019

Sustainability and Smart Investing: Why the Buzz About ESG Is Growing

Interest in ESG investing is blossoming as companies search for purpose beyond profits.  WHY: You can do good and do well. Academic research cited by DWS “provides strong evidence that environmental, social and governance factors positively influence corporate valuation and investment performance.” Also: “ESG data can potentially help mitigate against both idiosyncratic and systematic risks.“90% of ESG study results demonstrate that prudent sustainability practices have a “positive or neutral influence on investment performance.“Key takeaway: Think about ESG as another risk factor in your screening criteria which…
Insights NewsletterUncategorized
September 17, 2019

Sharing the Horse Race Information

Reasons to tell asset managers where they rank in the race against peers. A discussion of asset manager scorecards at last week’s NeuGroup meeting on corporate cash investment management prompted the question of whether, during review meetings, you should tell external managers where they rank among peers on the performance metrics you track. In other words, should you reveal the results of the horse race to the horses? Share results and compare to peers. The consensus was that yes, treasury should…
Insights NewsletterUncategorized
September 12, 2019

The Double Whammy Threatening Corporate Pension Plans

Low rates may reduce asset returns and lower discount rates, hiking liabilities. Lower interest rates may be great if you’re tapping the bond market. Not so much if you’re trying to fund a corporate pension plan.  Returns on assets fall. William Warlick at Fitch Ratings said the sudden dive in interest rates in July and August—10-year Treasuries fell below 2%, and by early September yielded about 1.5%—potentially creates a “double whammy.” The first whammy is that yields remaining low for an…
Capital MarketsInsights NewsletterUncategorized
September 11, 2019

SocGen: You Have Less Floating-Rate Debt Than You Think

One big eye-opener for many attendees at NeuGroup’s Tech20 2019 first-half meeting was sponsor Societe Generale’s suggestion that their floating-rate debt capacity was higher than they (most likely) currently thought it was—provided they hedge their FX, that is. Why? Because, according to this view, the FX hedge program reduces one’s net floating-debt exposure. In addition, if you agree that a recession is coming, rates will be staying put or going lower, making floating debt even cheaper. It pays to favor…