Tag Archives: wells fargo

Reports of branch channels’ demise greatly exaggerated

A few months ago, Bank of America reported that it would consolidate reducing the size of its branch network, with speculation that it would eventually close up to 10% of branches (Bank of America has grown its branch network aggressively over the past decade (organically and through acquisition) and even with a 10% decline, the bank would have approx. 5,500 branches).

Some industry commentators saw this announcement as indicative of the long-term demise of the branch channel.   With self-service channels accounting for a majority of service transactions, branch density does not have to be as high, so some branch consolidation is inevitable.

However, the bigger change is the repositioning of branches as platforms for more complex transactions that require one-to-one transactions with specialists.  The staff mix in branches will change, with fewer tellers needed to handle everyday transactions, and greater deployment of sales specialists (Chase recently reported that it grew its sales specialists from 5,454 in 1Q09 to 6,319 in 1Q10).

Growing proliferation of credit card annual fees

Bank of America reported in mid-October that it plans to impose annual fees on some of its credit cards.  In the short term , this will probably create some bad press for the bank.  However, all of the leading card issuers are overhauling their pricing models to address new card legislation as well as huge increases in charge offs and provisions for credit losses.  So, we should expect greater proliferation of annual fees, as well as lower incidence of introductory offers and higher APRs.  Some examples below of cards from leading issuers that feature annual fees (this list does not include secured cards, many of which come with annual fees):

  • Capital One No Hassle Cash Rewards: $39 annual fee
  • Fifth Third Platinum Prime MasterCard: $89 annual fee (although note that the APR on this card is Prime + 0%
  • PNC points Visa Signature: $75 annual fee (waived with $20,000 in annual spending on the card)
  • U.S. Bank FlexPerks Travel Rewards Visa: $49 annual fee (waived first year, and waived any year when at least $24,000 is charged to the card)
  • Escape by Discover: $60 annual fee

And of course, American Express has increased marketing of its charge cards, all of which have annual fees.

Ironically, Wells Fargo appears to have dropped the $19 annual fee that came with its credit card rewards program.  Rather than market an optional rewards program to cardholders, it simply promotes rewards and non-rewards credit cards.  Wells Fargo still imposes an annual fee (of $12) for an optional rewards program with its check card, and does allow customers to pool rewards earned on check and credit card spending.

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%