ABA Banking Journal - February 2008 - (Page 38)
RETAIL BANKING money hunt I n recent years, core deposit gathering has been extremely competitive, especially so for community banks, which can’t necessarily resort to tactics like acquisition in order to grow. The fine art of making the balance sheet work won’t get any easier, either. Threat of recession and the consumer-hailing habits of large and foreign-owned banks will make finding cheap and stable funding ever more a game for the stalwart and innovative. On the Pulling in deposits: in competitive times, value proposition and execution counts Deposit growth— checking accounts, savings, money market funds, and CDs—has averaged from 5% to 6% in most markets annually since 2000 with a few dramatic blips up and down along the way, says Gordon J. Goetzmann, managing vice-president, First Manhattan Consulting Group, New York. On average, the typical mid-sized bank relies on wholesale funding for 10% of its balance sheet assets. By Lauren Bielski, senior editor Growth of core deposits is generally tied to rate of inflation, net new formation of households, and net business growth, Goetzmann points out, making for regional variation. Not all community banks are losers in their efforts to reach out to consumers and small businesses, as indicated in following regional scan: • Bank deposits in Atlanta, spurred by population growth, flowed mostly into de novo and community banks in 2005, although a recent article in the Atlantic Business Chronicle pointed out that banks of all sizes were stepping up efforts to attract funds between 2006 and 2007. • In Massachusetts, as reported in the Boston Globe in October 2007, Bank of America’s market share fell from 19.3% to 18.2%, and Citizens Bank of Massachusetts and Sovereign Bank also experienced market share declines as consumers looked for a more personal touch. • In Michigan, deposits grew just 1.3% in the year between June of 2006 and 2007 as reported in Business Review of Western Michigan. In that state, regional bank Huntington Bancshares, with 46 offices in 12 counties, was the second performer regionally, with $1.93 billion in deposits as compared to market share leader Fifth Third, which held $6.34 billion in deposits but has, at 117 offices, a much larger physical network. Still, Anat Bird, formerly with Wells Fargo and founder of SCB Forums, San Francisco, thinks that regional and community banks fail to get a fair share. And yet attracting deposits will be a necessary activity, says Bird, who notes that commercial and industrial lending is still outpacing deposit growth in most 38 FEBRUARY 2008/ABA BANKING JOURNAL www.ababj.com/subscribe.html ILLUSTRATION BY JAMES ENDICOTT/IMAGES.COM
Table of Contents for the Digital Edition of ABA Banking Journal - February 2008
ABA Banking Journal - February 2008
On ABABJ.COM: Have You Visited Our Brand-New Website?
Snapshot: Tier 1 Ratios Stable so Far
100th Anniversary: Then and Now
ABA Chairman's Position
Pass the Aspirin
Cover Story: Socially Responsible Banking Profitably - Incoming America's Community Bankers Council Chairwoman, Dorothy Bridges Demonstrates the Way
A True "Rags-to-Banker" Story
Retail Banking: On the Money Hunt
Community Bank Management: The Ugly Truth About Board Relations
Does Core Really Matter?
Security 2.0: Not Just a New Kettle of Phish
A Personal Case of Mal-Serendipity
DOD Credit Regs Demand Attention
To Advertise/Index of Advertisers
ABA Banking Journal - February 2008
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