Please do not leave this page until complete. This can take a few moments.
In a sign of increased business optimism, more companies are depositing cash in short-term investment accounts in banks, with an overwhelming majority of depositors citing better cash flows as a reason, according to a survey from a finance professionals group and the parent of Citizens Bank.
Bank deposits now accounting for 52 percent – the largest percentage ever – of short-term corporate investment balances, according to data from the Financial Professionals (AFP) and underwritten by RBS Citizens, which is based in Providence, R.I.
The deposits continue to grow for three key reasons: there are few alternatives with any yield; companies are uncertain about future changes in money market funds; and many banks allow corporate customers to defray service fees through earnings credit rates on large cash holdings, according to the AFP Liquidity Survey, which gathered data from 740 respondents.
Despite a slow economic recovery, 36 percent of companies reported higher cash reserves in the last year, with 73 percent of those companies attributing those bigger reserves to improved operating cash flows.
“There are definitely signs that could be indicating change and rising optimism in the marketplace,” Matt Richardson, a senior vice president for RBS Citizens, said in a statement.
Meanwhile, 68 percent of respondents cited safety as a priority in the increased bank deposits, with 28 percent citing liquidity.
In another finding from the survey, fewer than a quarter of survey respondents reduced reserves, which they mainly used for capital expenditures (43 percent), retiring debt (28 percent), acquisitions and launches of new businesses (20 percent), or stock repurchases or dividends (20 percent).
“The pace of economic recovery is the determinant of cash decisions,” Jim Kaitz, AFP’s president and CEO, said in a statement. "We see corporate cash piles remaining in traditional vehicles until business prospects significantly improve or short-term rates inch up."
(Image courtesy FreeDigitalPhotos.net)
Stay connected! Every business day, WBJ Daily Report will be delivered to your inbox by noon. It provides a daily update of the area’s most important business news.
Sign upWorcester Business Journal provides the top coverage of news, trends, data, politics and personalities of the Central Mass business community. Get the news and information you need from the award-winning writers at WBJ. Don’t miss out - subscribe today.
SubscribeWorcester Business Journal presents a special commemorative edition celebrating the 300th anniversary of the city of Worcester. This landmark publication covers the city and region’s rich history of growth and innovation.
See Digital EditionStay connected! Every business day, WBJ Daily Report will be delivered to your inbox by noon. It provides a daily update of the area’s most important business news.
Worcester Business Journal provides the top coverage of news, trends, data, politics and personalities of the Central Mass business community. Get the news and information you need from the award-winning writers at WBJ. Don’t miss out - subscribe today.
Worcester Business Journal presents a special commemorative edition celebrating the 300th anniversary of the city of Worcester. This landmark publication covers the city and region’s rich history of growth and innovation.
In order to use this feature, we need some information from you. You can also login or register for a free account.
By clicking submit you are agreeing to our cookie usage and Privacy Policy
Already have an account? Login
Already have an account? Login
Want to create an account? Register
In order to use this feature, we need some information from you. You can also login or register for a free account.
By clicking submit you are agreeing to our cookie usage and Privacy Policy
Already have an account? Login
Already have an account? Login
Want to create an account? Register
This website uses cookies to ensure you get the best experience on our website. Our privacy policy
To ensure the best experience on our website, articles cannot be read without allowing cookies. Please allow cookies to continue reading. Our privacy policy
0 Comments