Rush into high-cost deposits delivers shifts in US banks' market share

A massive rotation into higher-cost deposits has rippled through banks' shares of the US market, though an absence of M&A left banks' individual rankings relatively steady.

Banks that rely on online platforms for deposit funding were among those that posted the largest increases in deposit portfolios, while Charles Schwab Corp., which has been hit hard by "cash sorting," had the biggest decline, at 17.0%. The numbers reflect S&P Global Market Intelligence data on the 50 banks with the biggest market shares, which is based on the Federal Deposit Insurance Corp.'s annual Summary of Deposits, a compilation of deposit levels as of June 30 at each bank branch across the country.

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Charles Schwab held on to 12th place despite the contraction, and in fact, all of the top 15 banks maintained their spots from the previous year, when mergers were a bigger factor and helped to shuffle the ranking. Last year included acquisitions stemming from three large failures in early 2023.

This year, Western Alliance Bancorp., which was buffeted by the turmoil in early 2023, made the biggest ascent in the ranking, climbing six spots to 34th place. In April, the $80.58 billion asset bank said it had largely accomplished steps it had taken to strengthen its balance sheet. In July, it lifted its deposit growth forecast for 2024 to $14.0 billion from $11.0 billion, reflecting strength in its mortgage warehouse business as competitors have pulled back.

One competitor pulling back was New York Community Bancorp Inc., which sold about $6 billion of mortgage warehouse loans to JPMorgan Chase & Co. in July. New York Community slipped two slots to 31st place after surging the year before on its acquisition of most of the failed Signature Bank, including a large amount of custodial deposits it expected to run off. The bank suffered heavy deposit outflows after rating downgrades in the first quarter, while its deposit levels stabilized after it raised capital and installed new leadership.

Comerica Inc. fell three spots to 37th place. Like many other banks, it has experienced outflows of non-interest-bearing deposits amid high interest rates, though it said the pressure has likely peaked.

Synchrony Financial climbed two spots to 29th place on a 9.7% increase in deposits. Also powered by online operations that offer attractive rates, American Express Co. and Discover Financial Services posted growth of 9.7% or more, though their rankings remained unchanged.

After the recent volatility in deposit levels at Charles Schwab, where clients reallocated money into investments offering higher returns, the discount brokerage has described plans to shrink its bank and expand its use of third-party banks for placing customer deposits.

Big 4 dominance

US deposits at the four biggest banks declined modestly, with drops of 2.9% at JPMorgan Chase and 1.8% at Citigroup Inc. partially offset by increases of 2.9% at Wells Fargo & Co. and 1.4% at Bank of America Corp.

Still, the US market remained concentrated with the Big Four accounting for 34.9% of deposits and the 50 biggest banks accounting for 73.6%.

Deposit growth across the industry has been modest, with domestically chartered banks posting year-over-year growth of about 1% to 2% since March, according to weekly data from the Federal Reserve, after a little more than a year of declines.

Fewer branches

Banks overall continued to close more branches than they opened across the country, with the number of branches declining 1,247 over the year to 77,414.

Meanwhile, JPMorgan Chase continued to stand out as one of the few large banks with a big branch network going in the other direction, expanding by five to 4,889. Others included Cullen/Frost Bankers Inc., with an expansion of 14 to 204 branches, and Pinnacle Financial Partners Inc., with an increase of nine to 153 locations.

Most states also experienced declines in branches. Tennessee was an exception among large states, with branches remaining flat at 1,946.

Among small states, Rhode Island was an exception, with an increase of six to 248 branches.