Big banks are still doing big business: A Wall Street Journal analysis of regulatory data found that the three largest U.S. banks by assets have added more than $2.4 trillion in domestic deposits over the past 10 years.
That’s a 180 percent increase — and exceeds what the top eight banks had in these deposits combined in 2007. It also shows that JPMorgan Chase & Co., Bank of America and Wells Fargo all managed to complete significant deals during the financial crisis, although there were questions about the size and business activities of these larger banks.
All three banks have seen their wealth increase in recent years as many consumers are putting their money at large financial institutions over smaller banks. At the end of 2007, the three banks held 20 percent of the country’s deposits. By the end of 2017, they held 32 percent ($3.8 trillion).
And last year, about 45 percent of new checking accounts were opened at the three national banks, even though they had only 24 percent of U.S. branches, according to research by consulting firm Novantas. In comparison, regional and community banks had 76 percent of branches but received only 48 percent of new accounts.
Another important fact: Customers opening the accounts with larger banks tend to be younger — and can be much more valuable to banks because of the promise of future business through mortgages or opening a brokerage account.
JPMorgan and Bank of America are vying for more business by opening branches in major U.S. cities where they don't already have locations. Bank of America has opened or announced plans to open around Denver, Indianapolis and other cities. While JPMorgan hasn’t named the 15 to 20 new markets it is entering, there is speculation that they will include Boston, Washington, D.C., and Philadelphia.
Yet with so much of banking being completed online or on mobile apps, many customers are choosing their banks solely based on name recognition and because they believe their technology is better, said Andrew Frisbie, executive vice president at Novantas.
Regardless of how customers are choosing to complete deposits, this growth for large banks gives them the financing they need to make loans. In addition, it allows them to avoid paying higher interest rates to depositors, which increases the banks’ profit margins.
“The biggest banks are winning,” wrote Tom Brown, CEO of hedge fund Second Curve Capital LLC, last month. “Small banks should be very concerned.”