CFOs DESCRIBE THEIR PERFECT BANK

Global Finance, 2004 by Platt, Gordon

Five top CFOs lay out what they're looking for from their banks. Their requirements range from global capacity to local knowledge. By Gordon Platt

SOUTHERN COMPANY RELIES ON TOP-TIER BANKS

Thomas A. Fanning, executive vice president and CFO of Atlanta-based Southern Company, says banking is not a one-size-fits-all proposition. "Our most important criterion for selecting a bank is that it understands Southern Company's strategy and our unique standing in the industry," he says.

One of the largest electricity producers in the US, Southern Company seeks to maintain a low-risk profile with investors. Its common stock is among the most widely held in the market. "The top-tier banks get most of our business," Fanning says. "We demand credibility at the highest levels of bank management. Personal relations matter a lot."

Fanning has worked for Southern Company for 22 years and has held executive positions at a number of its subsidiaries. he held the CFO title at Georgia Power and Mississippi Power and was most recently president and CEO of Gulf Power. Fanning is also responsible for corporate strategy at Southern Company, including mergers and acquisitions. During his six years at Southern Electric International, he led the company's entry into the international power-project arena.

"The competition for capital is worldwide, which is why we are telling our story in Europe, Canada and Asia," Fanning says. When it comes to selecting a bank, quality and service are as important, or more so, than price, he says. "We look for a bank with the ability to execute transactions in a world-class manner," he adds.

JETBLUE TAPS EUROPEAN BANKS FOR FINANCING

JetBlue Airways' banking activity is primarily related to the financing of its fast-growing fleet of new aircraft, says John Owen, executive vice president and CFO. The low-fare airline, based at New York's JFK airport, operates 53 Airbus A320 aircraft. In june 2003 JetBlue placed an order for 100 new Embraer-190 jet planes, with options to buy an additional 100 planes. The Embraer order could reach billion if all options are exercised.

"We rely on various syndicates of overseas banks to finance our aircraft acquisitions," Owen says. JetBlue also has orders with Airbus for a fleet of as many as 202 new A320 aircraft.

"The French, German and UK banks have been more aggressive in seeking our aircraft-financing business than have the US banks," Owen says. JetBlue relies on about 17 European banks, although not all participate in every syndicate. "Aircraft financing tends to be a bidding process based on who offers the lowest interest rate," says Owen, who joined JetBlue in January 1999 from Southwest Airlines, where he served for 14 years as treasurer and then as vice president for operations planning and analysis. "Price is one factor, but we also consider how much money a bank is willing to lend, and for how long," Owen says.

When it comes to standard cash-management and letterof-credit activities, JetBlue is consolidating its commercial banking activities at New York-based Citigroup. "The people at Citigroup have done a wonderful job in providing superior customer service," Owen says. "We used another major bank in the past, but its systems were not as good," he says.

DIAGEO KEEPS THE LINES OF COMMUNICATION OPEN

Matthew Lester, treasurer of London-based Diageo, the world's largest beer, wine and spirits group, says the company has a very good relationship with its banks and aims to keep it that way by having open and direct discussions with its bankers throughout the year. "We look for banks that have a world-class reputation in the areas where we need them to operate," Lester says. "We want the best banks out there."

Diageo has whittled down the number of banks it uses to 16 from 24 two years ago. "We have a very strong banking group that puts excellent people on our accounts," Lester says. "They invest the time to understand how our business works." Some of Diageo's banks are global financial-services providers, and others are specialist institutions. "No bank can meet every need in every market," Lester says. "Sometimes they may not have local collection facilities, for example."

Diageo relies on its commercial-paper program to meet its variable funding needs. The company's banks provide back-up facilities, but these are not drawn down. "We are very satisfied with our banks' performance, and we are willing to pay for good service," Lester says. "We recognize that this is a business relationship and that the banks need to make a reasonable return."

According to Lester, there are a lot of differences in the technological capabilities of even the biggest banks. "Some have invested heavily in this area, and some have not," he says.

NOKIA LIKES LONG-TERM RELATIONSHIPS

Nokia prefers a relationship approach to banking, says Richard A. Simonson, 45, who became senior vice president and CFO effective January 1, 2004. "It is important that our bankers understand Nokia's business," says Simonson, a former Bank of America and Barclays Capital executive with an MBA in finance from the Wharton School of the University of Pennsylvania. "If they know our business throughout the bank, then they do well," he says.