Tag Archives: banks

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.

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%

Falling marketing spend among financial institutions

Over the past year, most leading financial institutions have cut their marketing spend. As these firms face rising provisions for losses and declining revenues, they are look for other ways to cut costs, and marketing spend is squarely in their firing line.

bank_marketing_spend1

Banks are pursuing different approaches to cut marketing spend, including: altering the media mix to focus on less expensive media; and reducing/eliminating marketing of certain products (e.g., many banks have pulled back on credit card marketing over the past year).  In addition, banks should focus on getting the most from their marketing, by ensuring that it is synch with other aspects of their business, particularly sales.