Author Archives: mronan

3Q09 Bank deposit trends

The large U.S. banks continued to reduce rates paid on interest-bearing deposits in 3Q09, as deposit competition eases.  Many banks reported q/q declines in average deposits.  However, with banks’ loan portfolios also shrinking, most of these banks improved their loan-to-deposit ratios.

The largest banks (Bank of America, Wells Fargo and Chase) offer by far the lowest rates; Wells Fargo’s rate fell 3 bps between 2Q09 to 3Q09, to 0.57%.  Regional banks maintain relatively higher rates, with KeyBank’s average rate above 2%.

For most banks, there was stronger growth in noninterest-bearing deposits, with many regional banks reporting double-digit annualized increases between 2Q09 and 3Q09.

Bank

Average Interest-Bearing Deposits ($BN, 3Q09)

Annualized Change in Interest-Bearing Deposits
(2Q09-3Q09)

Rate on Interest-Bearing Deposits (3Q09)

Rate Change (2Q09-3Q09)

Non-Interest Deposits (3Q09)

Annualized change in Non-Interest Deposits (2Q09-3Q09)

Bank of America (domestic)

$654.2

+6%

0.98%

-24 bps

$259.6

+18%

Wells Fargo

$633.4

-3%

0.57%

-3 bps

$172.6

-4%

Chase

$661.0

-7%

0.65%

-5 bps

N/A

N/A

PNC

$146.9

-13%

1.04%

-21 bps

$41.8

+8%

U.S. Bank

$129.4

+11%

0.92%

-8 bps

$37.0

-4%

SunTrust

$95.2

-2%

1.40%

-27 bps

$24.5

-1%

Capital One

$103.1

-15%

1.86%

-22 bps

$12.8

+6%

BB&T

$89.9

+56%

1.37%

-26 bps

$17.4

+50%

Regions

$73.7

-5%

1.62%

-16 bps

$21.1

+14%

Key

$54.4

-3%

2.10%

-12 bps

$13.6

+37%

Zions

$31.9

-4%

1.21%

-25 bps

$11.4

+27%

M&I

$33.5

+12%

1.58%

-13 bps

$7.9

+28%

Huntington

$33.4

-1%

1.92%

-19 bps

$6.2

+5%

Signs of life in bank marketing spending?

Recent bank advertising campaigns (from Bank of America, American Express, Chase, Discover, and Visa) is leading to speculation that banks are once gain increasing bank advertising/marketing spend.  However, the latest financial data does not support this contention.  Most financial institutions reported year-over-year declines in advertising/marketing spend in 3Q09, and for many of these, the level of the y/y decline in 3Q09 was higher than that reported in 2Q09.  An exception was U.S. Bank, which grew ad spending 83% y/y to $137MM.

The following table tracks trends in advertising/marketing spend for some leading U.S. financial institutions:

Financial Institution

3Q09 Advertising/
Marketing Spend, $MM

Y/Y Change in 3Q09

Y/Y Change in 2Q09

American Express

                   $504

         –22%

         –47%

Bank of America

                   $470

         –22%

         –13%

JPMorgan Chase

                   $440

           –3%

          +1%

Citi

                   $317

         –36%

         –43%

Visa

                   $283

         -12%

         -15%

Wells Fargo

                   $160

           -2%

         -44%

U.S. Bank

                   $137

        +83%

        +21%

Morgan Stanley

                   $126

         -24%

         -35%

Capital One

                   $104

         -61%

         -53%

Discover

                     $78

         -44%

         -22%

PNC

                     $58

         -21%

         -27%

Key

                     $19

         -30%

         -19%

Huntington

                       $7

        +17%

          +2%

Leading credit card issuers reducing outstandings

Coverage of 3Q09 results from the leading U.S. credit card issuers focused–not surprisingly–on trends in their charge-off and delinquency rates, but many of these issuers have been significantly reducing outstandings in recent quarters. This is due to reduced acquisition activity, as well as charge offs.  The following is a list of end-3Q09 managed outstandings for the leading issuers, along with q/q and y/y changes:

  • Chase: $165.2 billion in EOP managed outstandings; down 4% q/q; down 11% y/y
  • Bank of America: $164.5 billion; down 3% q/q; down 10% y/y
  • Citi (Citi-Branded Cards in North America): $83.7 billion; up 2% q/q; down 1% y/y
  • Capital One (domestic credit card): $61.9 billion; down 4% q/q; down 11% y/y
  • American Express (U.S. Card): $51.9 billion; down 4% q/q; down 19% y/y
  • Discover (U.S. Card): $48.1 billion; down 2% q/q; down 2% y/y

And this reduction in outstandings should continue for the next few quarters, as issuers continue to pull back on acquisition activity, charge-offs remain high, and new credit card legislation comes into force.

However, it is worth noting that some of the second-tier bank card issuers, who are focused mainly on cross-selling existing bank customers, have grown outstandings:

  • Wells Fargo: $23.1 billion; up 2% q/q; up 16% q/q
  • U.S. Bank: $16.1 billion; up 10% q/q; up 31% y/y (in part due to an acquisition of card portfolios from Bank of America)
  • PNC: $4.1 billion; up 3% q/q
  • Fifth Third: $2.0 billion; up 3% q/q; up 17% y/y