What do you want from your bank, and how do you best get it? We spoke to a range of FDs, from a variety of businesses, to find out what’s important to your peers.

Our FDs all get approached regularly

A tick in the box for the business development people at banks: all of the FDs we spoke to get approached by banks regularly, and many see someone as often as once a week.

Big company FDs are hearing from a mix of investment banks and corporate banks. Investment banks are bringing intelligence on transactions, pitching new deal ideas and explaining what the bank can do to make transactions happen.

Corporate banks are also bringing a certain amount of market and transaction intelligence to their customers, but are more focused on the sale of corporate banking products.

Our FDs put the time in

Whether it’s speaking to investment or corporate banks, all of the FDs we spoke to believe that it’s an important part of their job to invest time in bankers.

We found a number of motivations for our FDs. They want to maintain productive working relationships, gain assurance about pricing and ensure that they know who to talk to when something needs to happen quickly, for instance when an acquisition opportunity becomes “live”.

Money may be the ultimate commodity but no FD has a monopoly on ideas. Our FDs respect the fact that a good banker has an overview of the industry he tracks and should be a useful partner for a discussion about trends and opportunities.

Our FDs have some good thoughts about getting the most out of banks

So what are FDs’ (your peers’) top tips for getting the most out of banks? As you’ll find below, it’s not all about pricing although, of course, our FDs all have a keen interest in getting a good deal!

Our FDs focus on relationships

Stuart Bridges is FD at Hiscox, a FTSE 250 insurance business with a market cap of more than £1bn. Bridges has a constant stream of banks through his office, probably at least one every week. In common with virtually all of the FDs we spoke to, when asked how to get the most out of banks, Bridges puts relationships at the top of his list.

According to Bridges “it’s not about the last pound of flesh”. We might have just seen the top of the credit cycle, but Bridges has been around long enough to appreciate that cycles come and go. He prefers to work with a core group of bankers who have earned that position by supporting Hiscox over many years. By working with a core group Bridges knows well, he has greater confidence that his banks will be able to respond effectively when he needs them to.

Our FDs help their banks understand their businesses

Ian Batkin is FD at Produce World, which supplies more than £100m of fresh produce to demanding customers such as Waitrose and Sainsbury each year. And demanding customers means he is very keen to make sure his supplier relationships, including those with his bank, are as productive as possible.

According to Batkin, the key is involving his principal bank in key developments for the business. It’s not just about providing the minimum of information. It’s about seeing the bank as a partner in the business and taking them along on the journey. “That’s going to make it much easier when you need a decision made, particularly when you need one made quickly,” he says.

Our FDs have a horizon that stretches beyond pricing

John Maguire, FD at listed telecoms business Thus, tells us it is not all about pricing, and that he is more focused on developing a group of people who understand his needs and can help when required. Thus has a lot of banking business flowing through its accounts, with receipts, payments and capex totalling around £1bn.

Even with all that business to go around though, Maguire doesn’t treat his banks simply as providers of a commodity product. He treats them as investors, giving them the same kind of information that analysts or major shareholders would receive. Maguire says it’s important for Thus to “deliver on promises, give banks visibility on our results and avoid nasty surprises”. Yes, the pricing needs to be in the right ball park, but building a relationship of trust is also important.

So how are banks doing?

So if our FDs are working their socks off to make sure their banks are happy even if, strictly speaking, there is no pressing need to, how are the banks doing? Well, “not too badly” seems to be the answer, although there are certainly issues that wind you up.

Chief among your grumbles seems to be petty admin requests, examples of inane bureaucracy and the odd bank that, in a brief fit of strategic change, decides that paying peanuts and employing monkeys might be a more efficient way to conduct business.

Needless to say, the FDs we spoke to are pretty quick to vote with their feet on any occasion they sense that happening. One of the wonderful things about participating in a capitalist democracy we think – an FD with a decent volume of business and a choice of suppliers has every opportunity to vote with his feet. All of which, of course, only serves to keep banks on their toes.

Top tips from FDs – how to get the most out of banks

• Focus on relationships.

None of our FDs wants a “he doesn’t bother me, so I don’t bother him” relationship with their bank manager. Our FDs are conscious that the needs of their business could change at any point, and they may need more support from their bank. Smart FDs treat banks much like they treat their shareholders, making sure they are aware of strategy and major developments, and that their banks appreciate the benefits of major changes made to the business.

Our FDs are aware that their bank relationship manager will have to justify the merits of any new lending opportunity. If a bank manager understands the business, can give a good account of himself to his credit committee, and gives the impression that working relationships are productive, then that’s going to be a great help on the occasion you need something from the bank.

• Help banks understand your business.

Start by finding a bank that has a hope of understanding your business, one that can field a team that has worked in your sector and has other clients in your industry. Of course, our FDs assume that their bank will respect confidences, but it helps to have a bank that is used to working with similar businesses and understands the issues they face.

If you have selected a bank that has the right experience then, as FD, your next job is to invest some time in bringing your bankers up to speed with the unique features of your business. Hopefully, if you’re working with a bright and experienced team, that shouldn’t be too hard.

• Listen to banks’ ideas.

Yes, it requires an investment of time but good banks do realise that they have to differentiate themselves. If they have a new product in the market, have some intelligence about the industry or M&A activity, or are going to be open about pricing then, as an FD, you’d be missing a trick by ignoring them.

None of our FDs has the time to hear from every bank that knocks on their door though, so our FDs have to prioritise among the existing relationships they have, adding the occasional provider who may have something new to offer.

• Don’t chop and change your banking providers.

Given the importance of relationships, none of our FDs say they would change banks lightly. As it being can be hard to differentiate between mainstream banks, “the value comes from the working relationship and past experience”. If you go elsewhere you have to be confident that you can replicate that.

• Spread your business around.

If you have a lot of banking business, then spreading the work between a selection of banks can keep them all enthusiastic, making sure you get the right deal.

• Deal with people you know and trust.

If you are an FD who does focus on the quality of your banking relationships, then you will want to work with people you get on with – people you know and trust, who you enjoy meeting, and who you respect. You could work with anyone who qualifies on the basis of pricing but, if the relationship is not one of trust, that pricing could change quickly if the bank finds itself in a position where it can exercise some power. Using pricing as your only criterion for selecting a banking partner could easily back fire.

• Benchmark your banks.

None of the FDs we spoke to runs formal tenders for each piece of work they have on offer. Tenders require a big time investment and that is bound to affect the enthusiasm with which banks approach them.

Our FDs do, however, regularly speak to new banks about key terms. Releasing that information to the bank you want to work with, outside of a formal tender, is usually all that is required to get a good deal. You don’t have to unseat the relationships you value by throwing everything out to tender, but you can still get the right deal by using information carefully.

Top grumbles from FDs – what our FDs wish banks would do better

• Focus on relationships.

Relationships govern the way our FDs do business so, if you are a bank, they have to govern the way you do business too. Banks, you need to remember this means your business is as much about people as operational efficiency.

To a boffin in a bank’s head office, increasing the size of your man’s portfolio by 20 per cent next year might seem like a good idea. So might hiring a bunch of cheaper fresh-faced graduates to see your seasoned and battle-weary bankers onto the golf course via the early retirement plan. However, using novice bankers to handle 20 per cent more customers is not going to help the quality of the relationship and, at the end of the day, it’s those relationships that deliver business to the bank.

Banks, if you focus too much on operational efficiency, the risk is your new business dries up.

• Understand our business.

As FDs we realise it’s part of our job to bring our banks up to speed. However, banks need to do their part too. Employing smart people, who are used to working with other businesses like ours, is a good start. If your people can come in and talk about industry trends and what they’ve seen working for our peers, then they can get our attention. Banking is a competitive market and, if you can’t understand our business and add value, you won’t stand much chance of doing more business with us.

• Try to offer something new or a bit different.

As FDs it’s also part of our job to keep an eye on what other people are doing. We know you have to respect confidences, but if you can tell us how a new product is working for someone else, or have general information about transactions afoot or businesses in administration, then you stand a good chance of getting us interested.

• Get to the point.

Yes we like hearing from banks and we want to work on the relationship, but please can we avoid the visitation from the five-strong bank posse? You know, the one that works a bit like a nuclear arms race, requiring us to invite five of our staff so that that boardroom table doesn’t overbalance on top of your team and find us liable to a prosecution from health and safety?

Oh, and forcing us to sit through 50 pages of detailed powerpoint doesn’t do much for us either. We are very happy to spend time with you but a one-to-one over a cup of coffee – where we can build rapport and bounce a few neat ideas around – that’s much more valuable for us and should serve your objectives better too.

We’re not that impressed by your bank’s budget for entertaining. We would be interested to hear practical examples of what you’ve been able to achieve for other similar customers though.

• Make our lives a bit easier.

We’re in the information age, so why do our banks give us so much paperwork? We appreciate that having this person sign this and that person sign that is sometimes necessary, but surely your technology is clever enough to make our lives a bit easier.

Oh, and by the way, when we are told we have to have a bit of paper from you (such as a bank balance for the auditor), with all the business we put your way, that £20 charge is just pure irritation.

• Get the basics right.

Remember that if your systems crash our systems grind to a halt too. In the middle of our payroll run, that’s more than embarrassing, and it’s completely unacceptable.

Insight – investment banks vs. corporate banks

If investment banks are pitching transaction ideas around the market and demonstrating to FDs how they can help reshape their businesses, just how clever are their not-so-little cousins at corporate banks?

Certainly, talking to FDs, it seems that business development techniques are not greatly dissimilar.

For both investment banks and corporate banks, relationships with senior execs get the door open a crack, and that gives banks the opportunity to pitch a few new ideas or products.

According to Neil Mackie, regional director for Lloyds TSB, it’s all about spending time understanding a client’s business, “understanding when they might be going into a transaction, and looking for an opportunity to help them with that”. That’s not so different from an investment bank, even if the corporate bank is more focused on channelling in some standard banking products and the investment bank is more interested in advising on the transaction or actually raising funds from capital markets.

Indeed, it’s not so difficult to point to examples of corporate banks and investment banks blending to the point where they become virtually indistinguishable. For example, we see corporate banks:

• Underwriting a whole deal and taking equity risk.

Bank of Scotland has an integrated finance product that sees the bank underwrite a whole deal and take equity risk, in effect to gain access to a bigger lending opportunity. RBS offers a similar product through its debt ventures arm. Lloyds TSB has its own private equity business. OK, the activities might not be in the same league as that of Goldman Sachs’ private equity arm but, at the end of the day, they’re all investing their money as principal, and that’s designed to give them access to broader opportunities.

• Recruiting corporate bankers into their own investment banking arms.

The growth of Barclays Capital as a profit generator for Barclays Bank must be the most notable recent example of a corporate bank expanding its investment banking activities. Although various high street banks have toyed with investment banking over the years, Barclays is probably the most commented-on example, if only for the astronomical remuneration packages obtained by its executives.

Recruiting corporate bankers into the investment bank has been part of the strategy for growing the investment bank, presumably because Barclays Capital has been bargaining on using the corporate banking relationship to offer investment banking products too.

It does make us wonder when the distinction between corporate and investment banks will disappear, if it hasn’t almost vanished already.

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Related tags: investment banks, produce world, fds, banks, hiscox, stuart bridges, john maguire, funding, ian batkin, banker, corporate banks, thus,