Monthly Archives: October 2010

Financial marketing spend continues to recover

Third-quarter financial data released by the large U.S. banks this week pointed to the continuation of a trend observed in the previous quarter: year-on-year growth in marketing spend. Marketing represents a leading indicator for banks, as it is one of the first expense categories to be hit at the start of a downturn. The corollary is that an increase in marketing spend is indicative of banks’ expectation that economic conditions are improving.

The following are changes in marketing spend for leading financial institutions between 3Q09 and 3Q10 (quarterly changes are not generally regarded as reliable, due to seasonal factors):

  • Huntington: +152%
  • Capital One: +140%
  • American Express: +68%
  • Discover: +68%
  • Chase: +48%
  • PNC: +40%
  • SunTrust: + 13%
  • Key: +11%
  • Wells Fargo: +6%
  • Bank of America: +6%
  • U.S. Bank: -21% (although note that U.S. Bank 3Q09 marketing spend was much higher than usual, due to the launch of a number of marketing initiatives)

Big banks winning larger share of deposits

The FDIC recently published U.S. deposit data for the period ended June 30, 2010. Two quick takeaways:

  1. Deposit growth slowed significantly over the past year.  Following the financial crisis in the second half of 2008, U.S. consumers ramped up their savings rates, and banks competed aggressively for these deposits.  As a result, U.S. deposits grew 7.6% between end-June 2008 and end-June 2009.  Over the past year, competition for deposits has declined, as many banks’ loan-to-deposit ratios fell below 100%, and banks’ need to grow deposits as a funding source abated.  The growth rate for deposits in the year to end-June 2010 was 1.5%.
  2. Due to bank consolidation, a flight to safety, and a re-emphasis on relationship banking, larger banks have grown deposits at a stronger rate than the industry average.  The top 50 U.S. banks increassed deposits  by 4.4% in the year to end-June 2010, compared to 1.5% for all banks.  The top 50 banks’ share of total deposits rose from 57% in 2007 to 63% in 2010.

New FDIC data shows reduction in banks, branch numbers

FDIC has published comprehensive U.S. bank data for the period ended June 30, 2010. It reported that the number of bank branches fell 1.0% year-over-year, to 98,514. The total number of banks (comprised of commercial banks and savings institutions) fell by a larger percentage, 4.4%, to 7,820.

It is worth noting that, at the height of the financial crisis, some industry commentators believed that the number of banks in the U.S. would fall by 50%.  At the current rate of attrition, this is very unlikely.  However, bank consolidation should continue, with banks that have weathered the financial crisis well picking up failed or vulnerable banks in order to expand their retail footprint.  This may involve some branch reduction, as overlapping branches are eliminated.  However, branch numbers should continue to decline at a lower rate than banks.

From a marketing and sales support perspective, bank mergers and acquisitions create both opportunities (expanded retail footprint; access to new products, services and technologies; potential entry into new customer segments) and challenges (rebranding acquired banks and branches; implementing consistent marketing and sales support processes; minimizing churn from acquired bank customers, etc.).