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Big banks grow despite fee fury

By Claes Bell, CFA · Bankrate.com
Wednesday, October 3, 2012
Posted: 4 pm ET

Watch for falling data! The Federal Deposit Insurance Corp. this week updated its Summary of Deposits, a massive collection of data culled from banks nationwide. Here are some key findings.

First off, the backlash over rising checking fees hasn't translated into a lower share of the nation's deposits for the biggest banks. Contrary to what you might think based on the whole Bank Transfer Day thing, smaller banks still look to be losing ground, continuing a trend of industry consolidation that stretches back more than a decade.

Despite consumers making noise about switching banks over fees, big banks continue to grow (photo by floodllama)

Despite consumers making noise about switching banks over, big banks continue to grow. (photo by floodllama)

According to my math, the percentage of deposits held by the top 10 biggest banks rose from 52.6 percent in 2011 to 54.3 percent in 2012, driven in part by Capital One's acquisition of saver favorite ING Direct. Meanwhile, banks with assets less than $1 billion saw their share of deposits fall from 14.3 percent in 2011 to 13.2 percent in 2012.

Overall, banks that stretch across multiple states now hold 79 percent of all deposits compared to 78 percent last year, leaving a smaller share behind for community banks. And reflecting the massive number of bank failures we've seen since the beginning of the financial crisis, the number of FDIC-insured banks operating nationwide has fallen by more than 1,200 since 2006.

But all is not lost for the little guy. Bank of America seemed to take a little bit of a hit over the debit card fee debacle of 2011. It lost a little more than a half percentage of market share compared to last year, falling from 14.6 percent of total deposits to 14 percent. And it's important to note that credit unions aren't part of this survey, it's pretty clear credit unions' customer base has grown substantially since last year.

That would seem to suggest that banks are losing at least some business over rising fees, and the fallout from rising fees is far from settled at this point. A recent Bankrate Financial Security Index poll found 72 percent of bank customers would consider switching if their fees rose. Unfortunately for community banks, most of those switching accounts appear to be moving to credit unions and other big banks.

Another interesting takeaway from the data is that banks are splitting up a much bigger pie when it comes to deposits. Crunching the FDIC numbers, it looks like total deposits at commercial banks rose a whopping 10 percent from the same time last year, reflecting both the massive amount of cash many businesses are sitting on at the moment and the reluctance of many Americans to subject their savings to the whims of the market.

What do you think? Will community banks continue to lose ground to large banks? Would you consider switching to a local bank or credit union in the face of rising bank fees?

Follow me on Twitter: @ClaesBell.

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