CFOs Sound Optimistic Note

Finance chiefs plan to start using stockpiled cash in coming year.

Corporate finance executives are feeling upbeat about their companies’ prospects and say they plan to start deploying some of the cash they’ve stockpiled over the next 12 months, according to an annual survey by American Express. Of the 541 senior finance executives surveyed worldwide, 45% say they are likely to spend some part of their cash reserves in the coming year. Just 34% say they plan to continue to preserve their cash hoard, down from 62% in 2011.

Spending plans are stronger among U.S. finance executives, with 52% saying they plan to put some of their cash reserves to work in the coming year. Just 31% of U.S. executives say they’re not planning to spend any of their cash, down from 48% in 2011.

Asia-Pacific was the only region where finance executives intent on preserving their cash reserves exceed those who plan to start spending, notes Robert Clarkson, vice president and general manager of global corporate payments at American Express. Just 33% of Asia-Pacific finance executives say they are likely to tap their cash hoard, while 41% say they don’t plan to.

“Asia-Pacific is still hanging onto money more than the rest of the world is,” Clarkson says, and attributes that to the aftermath of 2011 earthquake and tsunami. “They probably have more structural issues and therefore it may be a while longer before they can invest in growth-oriented opportunities,” he says.

Among CFOs worldwide, 74% say they’re most likely to tap cash to pay for ongoing operations, and 70% plan to spend on expanded operations and hiring. In the U.S., the most popular use for cash was mergers and acquisitions, cited by 63% of executives, followed by expanded operations and hiring, cited by 58%.

Clarkson says the plans for hiring are a plus for the economy and notes that the survey indicates “a real focus on specialized labor.

“It’s not just hiring for hiring’s sake, it’s people with specific expertise that they’re looking for, whether in manufacturing or finance or other industries,” he says. 

CFOs worldwide have gotten a little less optimistic about the outlook for the economy, with 64% saying they expect modest to substantial economic growth over the next 12 months, down from 75% in 2011 and 71% in 2010. U.S. finance executives are more bullish, with 78% expecting moderate to substantial expansion over the next year, barely changed from 79% last year.

Clarkson cites Europe’s sovereign debt crisis as a weight on the growth outlook, but notes that even within Europe, expectations vary widely. “The U.K. tends to be much less optimistic than other countries, whereas Germany is closer to the U.S.’s perception,” he says. Seventy-four percent of German finance executives expect moderate to substantial growth, vs. just 24% of U.K. CFOs.

 

Read more about the American Express survey here.

 

 

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