THE CALL · THE LOAN · PRICE
A borrower's finance director says its weighted average cost of capital is 9%, so a project returning 11% creates value. The project is far riskier than the rest of the business.
// WORKED EXAMPLETHE ARITHMETIC A DECISION RESTS ON
Wallet Share in Corporate Banking: a Worked Example
The loan opens the door; the rest of the banking pays for it.
BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
// THE SHORT ANSWER
Wallet share is the measure a relationship bank uses to answer one question about a client: of everything this business pays its banks each year, how much comes to us? The answer is set against the bank's share of the client's borrowing, because lending uses the bank's capital and earns thin returns, while payments, foreign exchange and hedging earn fees on very little capital. A bank that provides much of the debt and earns little else is subsidising the client. The measure shapes pricing, how much a bank is willing to lend and hold, and what it asks for at renewal.
BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.
// BEFORE THE BANK READS IT
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// 01 — WHY A LENDER COUNTS MORE THAN THE LOAN
A committed loan ties up capital for years, and its margin, after funding, expected losses and running costs, often leaves a modest return on that capital. The other banking a business buys is different. Running its accounts and payments, converting its foreign currency, writing its hedges and holding its deposits earn fees and spreads that use far less capital. A bank lending to a mid-market business usually prices the loan with the rest of the relationship in mind, and wallet share is how it checks whether the rest has arrived.
Clients run the same arithmetic from the other side. Corporate treasurers with several banks often keep their own tables comparing each bank's share of the fees with its share of the committed credit, and use them to decide which bank gets the next mandate. A bank that knows its client keeps such a table is reading the same ledger from the opposite end.
// 02 — HOW THE WALLET IS SIZED
Wallet = annual banking revenue the client generates, all banks
Wallet share = our revenue from the client ÷ wallet
Share of debt = our committed lending ÷ total committed lending
The hard part is the denominator. A bank sees its own revenue exactly and its competitors' only by inference. Where the accounts are full enough, the interest note shows the cost of debt and the bank charges line shows fees; the cost of imports or the value of exports suggests the foreign-exchange flow, to which a typical spread can be applied; a derivatives note, where there is one, shows whether there are hedges, though seldom with whom. Payments that leave the client's account for another bank show where other accounts sit. At reviews the client may simply say who does what. The result is an estimate, best held as a range.
Practice differs on what goes in. Many teams count lending at its margin and fees rather than its full interest, because the base rate passes through to funding, and count deposits at the spread the bank earns on them. What matters is counting the same way each year, so the trend is real even where the level is rough.
// 03 — THE EXAMPLE
A fertiliser distributor, constructed for this page like every figure in it, borrows US$60m from three banks. The bank in this example provides US$24m, or 40%. Its estimate of the client's annual banking wallet, with lending counted at margin and fees:
Wallet Ours
Lending margin and fees 1,200,000 480,000
Payments and cash management 400,000 0
Foreign exchange on imports 600,000 90,000
Interest rate hedging 150,000 60,000
Deposits 150,000 20,000
Total 2,500,000 650,000
Share of debt 24 ÷ 60 = 40%
Share of wallet 650 ÷ 2,500 = 26%
Outside lending 170 ÷ 1,300 = 13%
The bank is the largest lender and a minor supplier of everything else. Another bank runs the accounts; a third does most of the currency. What that means for return is the next step, using the bank's own figures:
Lending: 480,000 − 190,000 costs and expected loss = 290,000
on capital of 2,400,000 = 12.1%
Relationship: 290,000 + (170,000 − 50,000 costs) = 410,000
on the same capital = 17.1%
The example assigns the non-lending business no extra capital, which flatters it slightly. On these numbers the loan alone falls short of the 15% target this example's bank sets, and the relationship clears it. The capital figure and the target belong to the example, not to any market.
// 04 — WHAT A LENDER READS BESIDE IT
Wallet share is a share of revenue. The return on the relationship is a return on capital: what RAROC measures for a single loan, extended to everything the client buys. The two can disagree. A large share of a small wallet can earn less than a small share of a large one, and a share won by cutting the price of foreign exchange may raise the share while lowering the return.
It also differs from market share. Market share counts a bank's part of all business of one kind across many clients; wallet share counts its part of one client's business of every kind. A bank can lead the market in business lending and still hold a thin share of most of its borrowers' wallets.
DEFINED IN ONE PARAGRAPH → · THE RELATIONSHIP MANAGER SCORECARD → · THE NEXT PIECE OF THE WALLET →
// 05 — WHERE IT DECIDES A FILE
It decides price first. A relationship manager asking to match a competitor's margin will point to the deposits and the payments the bank already holds, or expects to win; the price-setter in The Term Sheet War faces a request of that kind. It decides hold second: a bank earning 13% of the non-lending wallet while carrying 40% of the debt may choose to reduce its commitment at renewal rather than keep pricing on hope. And it shapes the conversation with the client, which knows its own wallet better than any of its banks do. The fair request is the one a client's own table would support: a share of the ancillary business closer to the share of the credit.
HOW BANKS PRICE A BUSINESS LOAN → · THE ANCILLARY FACILITY →
// QUESTIONS PEOPLE ASK
- How do you calculate share of wallet in corporate banking?
- Estimate the client's total annual spend on banking across all its banks: lending margin and fees, payments and cash management, foreign exchange, hedging and the value of its deposits. Divide the revenue your bank earns from the client by that total. Because competitors' revenue is inferred from the accounts and the client's own disclosures, the result is an estimate; it is most useful as a trend, measured the same way each year.
- What is a good share of wallet?
- There is no single level. It depends on how many banks the client uses, what each provides and what the bank's capital is doing. The more useful comparison is between a bank's share of the wallet and its share of the client's committed lending. Where the first is well below the second, the bank is giving more balance sheet than the relationship pays for, which the bank may accept for a time.
- What is the difference between wallet share and market share?
- Market share is a bank's portion of one kind of business, such as business lending, across all clients in a market. Wallet share is its portion of all the banking one client buys. A bank can hold a large market share in lending and a small wallet share with most borrowers, if those borrowers take their payments, currency and hedging elsewhere.
- Why do banks price loans below target to win other business?
- Because lending is often the way into a relationship, and a committed facility gives the bank standing to win the accounts, payments, foreign exchange and hedging that earn more on less capital. The risk is that the other business does not arrive. Banks therefore track wallet share after the loan is made and revisit price or commitment at renewal when the expected business has not followed.
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