Deposit growth in the banking industry has become a zero-sum game for all intents and purposes. Several months ago we published a white paper that revealed the deposit dilemma appeared more serious than anticipated, based on 2018 data. The results in the first quarter of 2019 were mixed. Here are five significant findings from our analysis of first quarter deposits:
In a nutshell, the least-sticky and most expensive form of deposits (CDs) are growing at the expense of the most-sticky and least expensive product (transaction accounts). They are absorbing virtually all the growth in the supply of deposits in the banking system.
For what it’s worth, community banks under $1 billion, which had a relatively strong 2018 in transaction account growth, lost ground in the first quarter by shedding $2.9 billion of transaction accounts. Who knows if this is an aberration or the beginning of a trend, but it does suggest size matters, and community banks might be far better off teaming up with one another through M&A, rather than continuing to slug it out.
Between the relative success of community banks and the recent struggles of the top 4 banks, one may conclude that community banks are more than holding their own. However, the top 4 banks all have a LTD ratio under 70 percent and have not been growing their loan portfolios, which suggests that they have not yet felt the urgency to release their arsenal on the banking market — or we haven’t yet felt the impact of their existing initiatives. For example, we have yet to see the results from JPMorgan’s heavily-discussed branch expansion plans, which include 400 new locations over the next five years or Citi’s ROI from massive investments in digital banking.
It’s also becoming more difficult for banks to compensate by procuring higher loan yields, as our BankGenome™ database shows that prepayment rates are increasing and renewal rates are decreasing as borrowers shop around to pre-empt an increase in their borrowing costs.
1 | Citibank, National Association | + $20,858,000 |
2 | JPMorgan Chase Bank, National Association | +$14,076,000 |
3 | Capital One, National Association | +$9,764,698 |
4 | Goldman Sachs Bank USA | +$7,600,000 |
5 | Ally Bank | +$7,318,000 |
6 | Chase Bank USA, National Association | +$4,994,443 |
7 | USAA Federal Savings Bank | +$4,526,525 |
8 | U.S. Bank National Association | +$4,193,864 |
9 | CIT Bank, National Association | + $3,536,114 |
10 | PNC Bank, National Association | + $3,504,210 |
1 | Wells Fargo Bank, National Association | ($16,218,000) |
2 | Bank of America, National Association | ($13,960,000) |
3 | The Bank of New York Mellon | ($13,431,000) |
4 | Charles Schwab Bank | ($12,176,000) |
5 | State Street Bank and Trust Company | ($12,021,578) |
6 | Morgan Stanley Bank, National Association | ($10,549,000) |
7 | Capital One Bank (USA), National Association | ($5,123,511) |
8 | TD Bank, National Association | ($2,585,004) |
9 | The Huntington National Bank | ($2,442,493) |
10 | UBS Bank USA | ($2,361,440) |
1 | Manufacturers Bank | +$1,422,317 |
2 | NexBank, SSB | +$887,614 |
3 | Green Dot Bank DBA Bonneville Bank | +$756,183 |
4 | Bell Bank | +$708,377 |
5 | Israel Discount Bank of New York | +$554,039 |
6 | Woodforest National Bank | +$455,099 |
7 | Seacoast National Bank | +$429,180 |
8 | SouthEast Bank | +$394,058 |
9 | Live Oak Banking Company | +$374,969 |
10 | HomeStreet Bank | +$352,184 |
1 | Wilmington Trust, National Association | ($828,923) |
2 | Bessemer Trust Company, National Association | ($767,472) |
3 | EagleBank | ($296,185) |
4 | John Deere Financial, f.s.b. | ($238,315) |
5 | Atlantic Capital Bank, National Association | ($232,188) |
6 | Union Bank and Trust Company | ($207,860) |
7 | Washington Trust Bank | ($186,612) |
8 | Silvergate Bank | ($185,670) |
9 | Banc of California, National Association | ($171,961) |
10 | BNB Bank | ($162,122) |
If you would like to see how your bank ranks in the quarter across all deposits or any deposit category by asset size, state, or a selected peer group, we would be happy to provide you with a complimentary report. Please send an email to George Callas at gcallas@invictugrp.com or call him at (718) 219-0441 with your request.