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Retail Banking - US - October 2010

The U.S. retail banking business is large and diverse. More than 15,000 banks, thrifts and credit unions hold nearly $10 trillion in total deposits. Credit unions have been increasing their share of the business since 2008, although their share remains well under 10%.

Bank profitability increased sharply in the first half of 2010, driven by huge declines in loan-loss provisions and wide net interest margins. But bank earnings remain well below pre-2007 profit levels. Revenue is down and is expected to remain weak, mostly due to limp loan growth and new laws and regulations limiting bank fee income on overdrafts and debit card transactions.

Despite the profit improvement, more than 800 banks, or more than 10% of the total number of banks, are on the FDIC’s problem list. Many of those banks will likely be consolidated into larger, healthier institutions. The FDIC expects bank failures to peak in 2010.

Continued high unemployment, fears about job loss and pessimism about the economy continue to influence consumers to reduce spending and borrowing and save more money. The personal savings rate has more than doubled in 2008, 2009 and 2010, and continues to grow. Mortgage originations and credit card debt are down sharply.

Despite the increase in savings, many households still don’t have enough money to meet their expenses. Many are tapping into their retirement accounts and going without important financial safety nets, like life insurance.

This report builds on the analysis presented in previous Mintel reports including Deposit Accounts—July 2010, Retail Banking, December 2009, Retail Banking—September 2008, as well as previous Mintel reports on this subject.

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Data sources
        • Consumer survey data
          • VMS
            • Abbreviations and terms
              • Abbreviations
              • Executive Summary

                • Market size and characteristics
                  • Industry outlook
                    • The retail banking consumer
                      • Advertising and promotion
                      • Insights and Opportunities

                          • Consumer interest in prepaid cards is growing; so is market size
                            • Figure 1: Prediction for rapid growth in prepaid volume, 2009-17
                          • Customers want banks to promote environmental initiatives
                            • Contests still resonate as a marketing tool
                              • Target finance and investment ads to young people and blacks
                              • Inspire Insights

                                  • Banking Green
                                    • What's it about?
                                      • What we've seen
                                        • What may work
                                          • Citibank Tries a Two-Way Approach
                                            • Can Dog Biscuits Attract Banking Customers?
                                              • A recipe for success
                                              • Market Size and Forecast

                                                • Key points
                                                  • Market size: Nearly $10 trillion; credit union share continues to rise
                                                      • Figure 2: Growth in total U.S. savings deposits, 2006-Q2 2010
                                                      • Figure 3: Share of U.S. savings deposits, 2006-Q2 2010
                                                  • Competitive Context

                                                    • Key points
                                                      • The U.S deposit business is big and diverse
                                                          • Figure 4: Deposits and market shares at top 10 U.S. commercial banks, Q2 2010
                                                        • Number of troubled banks rises, but average size declines
                                                            • Figure 5: Top 10 U.S. commercial banks by deposits, five-year trend, 2005-09
                                                          • Deposits at credit unions growing faster than banks
                                                              • Figure 6: Largest U.S. credit unions and market shares, 3/31/09 and 3/31/10
                                                          • Segment Performance

                                                            • Key points
                                                              • Bank profits rebound in first half of 2010
                                                                  • Figure 7: Quarterly bank net income, Q2 2003-Q2 2010
                                                                • Net interest income rises sharply on low interest rates
                                                                  • Top 10 banks outperform industry
                                                                      • Figure 8: Net income at top U.S. banks by deposits, 2Q 2010 vs. 2Q 2009
                                                                      • Figure 9: Net income at top U.S. banks by deposits, 2005-09
                                                                    • Banks face weaker fee revenue from new overdraft, debit regulations
                                                                        • Figure 10: Bank overdraft revenue, 2000-10
                                                                      • Fiserv estimates overdraft hit at $6 billion to $15 billion
                                                                        • Smaller banks and credit unions may benefit from Reg E Changes
                                                                          • Debit card interchange fees also at risk
                                                                            • Large banks have limited options to deal with these threats
                                                                            • Market Drivers

                                                                              • Key points
                                                                                • Economy, consumer mindset bode well for savings, bad for lending
                                                                                    • Figure 11: U.S. personal savings rate, full year 2005-June 2010
                                                                                  • Consumer debt has peaked, but remains heavy
                                                                                      • Figure 12: Total U.S. residential mortgage debt, full year 2003-Q1 2010
                                                                                    • Credit card debt, accounts fall sharply since 2008
                                                                                      • Figure 13: U.S. consumer credit outstanding, year end 2005-Q2 2010
                                                                                    • Consumers rely on savings, retirement funds to live
                                                                                      • Consumers still plenty bearish about the economy
                                                                                        • Figure 14: U.S. unemployment rate, 2009-August 2010
                                                                                      • Pessimism abounds
                                                                                          • Figure 15: Case-Shiller Home Price Index: April 2006-May 2010
                                                                                      • Leading Companies

                                                                                        • Key points
                                                                                          • Bank of America
                                                                                            • JPMorgan Chase
                                                                                              • Citigroup
                                                                                                • Wells Fargo
                                                                                                  • U.S. Bank
                                                                                                    • PNC Financial Services
                                                                                                      • SunTrust
                                                                                                        • Capital One
                                                                                                          • USAA
                                                                                                            • TD Bank
                                                                                                              • Navy Federal Credit Union
                                                                                                                • HSBC
                                                                                                                  • ING Direct
                                                                                                                    • American Express
                                                                                                                      • BBVA Compass
                                                                                                                      • Innovations and Innovators

                                                                                                                        • Key points
                                                                                                                          • BBVA Compass launches “Build My Savings” on Facebook
                                                                                                                            • BBVA Alliance with SmartyPig
                                                                                                                              • Spanish language TV network launches prepaid MasterCard
                                                                                                                                • e3Bank: The Ultimate Green Bank Idea
                                                                                                                                  • Auto Circle from USAA
                                                                                                                                    • Quick Deposit and QuickPay from JPMorgan Chase
                                                                                                                                      • Paperless ATM receipts From Wells Fargo
                                                                                                                                        • ‘Save to Win’ contest generates accounts for Michigan Credit Unions
                                                                                                                                        • Marketing Strategies

                                                                                                                                          • Key points
                                                                                                                                            • Notable direct mail advertising
                                                                                                                                              • Figure 16: BBVA Compass direct mail ad, May 2010
                                                                                                                                              • Figure 17: BBVA Compass direct mail ad, February 2010
                                                                                                                                              • Figure 18: BBVA Compass direct mail ad, July 2010
                                                                                                                                              • Figure 19: HSBC direct mail ad, July 2010
                                                                                                                                              • Figure 20: Ally Bank direct mail ad, April 2010
                                                                                                                                              • Figure 21: TCF Bank direct mail ad, March 2010
                                                                                                                                              • Figure 22: Harris Bank direct mail ad, July 2010
                                                                                                                                              • Figure 23: Citibank direct mail ad, June 2010
                                                                                                                                              • Figure 24: Cypress Credit Union, direct mail ad, July 2010
                                                                                                                                              • Figure 25: Webster Bank direct mail ad, July 2010
                                                                                                                                              • Figure 26: Discover/AAA direct mail ad, March 2010
                                                                                                                                            • Television advertising
                                                                                                                                              • Figure 27: Ally Bank television ad, September 2010
                                                                                                                                              • Figure 28: BB&T television ad, September 2010
                                                                                                                                              • Figure 29: Bank of America television ad, September 2010
                                                                                                                                              • Figure 30: Chase television ad, September 2010
                                                                                                                                              • Figure 31: PNC Bank television ad, September 2010
                                                                                                                                              • Figure 32: Regions Bank television ad, September 2010
                                                                                                                                          • The Consumer

                                                                                                                                            • Key points
                                                                                                                                              • More than 40% of respondents bank at big national banks
                                                                                                                                                • Primary institution for checking account
                                                                                                                                                  • Figure 33: Type of institution for primary checking account, by gender, July 2010
                                                                                                                                                  • Figure 34: Type of institution for primary checking account, by age, July 2010
                                                                                                                                                  • Figure 35: Type of institution for primary checking account, by household income, July 2010
                                                                                                                                                  • Figure 36: Type of institution for primary checking account, by education, July 2010
                                                                                                                                                  • Figure 37: Type of institution for primary checking account, by census region, July 2010
                                                                                                                                                  • Figure 38: Type of institution for primary checking account, by area, July 2010
                                                                                                                                                  • Figure 39: Type of institution for primary checking account, by gender and household income, July 2010
                                                                                                                                                • Primary institution for savings account
                                                                                                                                                  • Figure 40: Type of institution for primary savings account, by gender, July 2010
                                                                                                                                                  • Figure 41: Type of institution for primary savings account, by age, July 2010
                                                                                                                                                  • Figure 42: Type of institution for primary savings account, by household income, July 2010
                                                                                                                                                  • Figure 43: Type of institution for primary savings account is, by education, July 2010
                                                                                                                                                  • Figure 44: Type of institution for primary savings account, by census region, July 2010
                                                                                                                                                  • Figure 45: Type of institution for primary savings account, by area, July 2010
                                                                                                                                                  • Figure 46: Type of institution for primary savings account, by gender and household income, July 2010
                                                                                                                                                • Few respondents likely to defect to avoid fees
                                                                                                                                                    • Figure 47: Interest in switching banks to avoid fees, by gender, July 2010
                                                                                                                                                    • Figure 48: Interest in switching banks to avoid fees, by age, July 2010
                                                                                                                                                    • Figure 49: Interest in switching banks to avoid fees, by household income, July 2010
                                                                                                                                                    • Figure 50: Interest in switching banks to avoid fees, by education, July 2010
                                                                                                                                                  • Four in 10 would switch for rewards, but 75% are opposed to annual fees to get them
                                                                                                                                                      • Figure 51: Interest in switching banks to get better rewards, by gender, July 2010
                                                                                                                                                      • Figure 52: Interest in switching banks to get better rewards, by age, July 2010
                                                                                                                                                      • Figure 53: Interest in switching banks to get better rewards, by household income, July 2010
                                                                                                                                                      • Figure 54: Interest in switching banks to get better rewards, by education, July 2010
                                                                                                                                                    • Overdraft protection: More respondents will opt out than opt in
                                                                                                                                                        • Figure 55: Intention to opt in to overdraft protection, by gender, July 2010
                                                                                                                                                        • Figure 56: Intention to opt in to overdraft protection, by age, July 2010
                                                                                                                                                        • Figure 57: Intention to opt in to overdraft protection, by race/ethnicity, July 2010
                                                                                                                                                      • More than 20% would consider switch to prepaid cards to avoid fees
                                                                                                                                                          • Figure 58: Interest in a prepaid card over a debit card, by gender, July 2010
                                                                                                                                                          • Figure 59: Interest in a prepaid card over a debit card, by age, July 2010
                                                                                                                                                          • Figure 60: Interest in a prepaid card over a debit card, by household income, July 2010
                                                                                                                                                        • Savings accounts less popular than checking accounts
                                                                                                                                                            • Figure 61: Types of accounts held at primary bank, by gender, July 2010
                                                                                                                                                            • Figure 62: Types of accounts held at primary bank, by age, July 2010
                                                                                                                                                            • Figure 63: Types of accounts held at primary bank, by household income, July 2010
                                                                                                                                                            • Figure 64: Types of accounts held at primary bank, by education, July 2010
                                                                                                                                                          • Nearly a third of respondents’ checking accounts carry rewards
                                                                                                                                                              • Figure 65: Types of accounts with a rewards program, by gender, July 2010
                                                                                                                                                              • Figure 66: Types of accounts with a rewards program, by age, July 2010
                                                                                                                                                              • Figure 67: Types of accounts with a rewards program, by race/ethnicity, July 2010
                                                                                                                                                              • Figure 68: Types of accounts with a rewards program, by household income, July 2010
                                                                                                                                                              • Figure 69: Types of accounts with a rewards program, by education, July 2010
                                                                                                                                                            • More than two thirds of survey respondents pay bills online
                                                                                                                                                                • Figure 70: Pay bills online, by gender, July 2010
                                                                                                                                                                • Figure 71: Pay bills online, by age, July 2010
                                                                                                                                                                • Figure 72: Pay bills online, by household income, July 2010
                                                                                                                                                                • Figure 73: Pay bills online, by gender and household income, July 2010
                                                                                                                                                                • Figure 74: Pay bills online, by education, July 2010
                                                                                                                                                                • Figure 75: Pay bills online, by area, July 2010
                                                                                                                                                              • Nearly 75% of respondents would recommend their bank to others
                                                                                                                                                                  • Figure 76: Opinion of banks, by gender, July 2010
                                                                                                                                                                  • Figure 77: Opinion of banks, by age, July 2010
                                                                                                                                                                  • Figure 78: Opinion of banks, by gender and household income, July 2010
                                                                                                                                                                  • Figure 79: Opinion of banks, by household income, July 2010
                                                                                                                                                                • Financial education is a way to reach some consumers
                                                                                                                                                                    • Figure 80: Interest in financial subjects and investing, by gender, July 2010
                                                                                                                                                                    • Figure 81: Interest in financial subjects and investing, by age, July 2010
                                                                                                                                                                    • Figure 82: Interest in financial subjects and investing, by household income, July 2010
                                                                                                                                                                    • Figure 83: Interest in financial subjects and investing, by gender and household income, July 2010
                                                                                                                                                                    • Figure 84: Interest in financial subjects and investing, by race/ethnicity, July 2010
                                                                                                                                                                    • Figure 85: Interest in financial subjects and investing, by gender and presence of children, July 2010
                                                                                                                                                                  • Most consider convenience a driver for bank services
                                                                                                                                                                      • Figure 86: Preferred location for bank branch, by gender, July 2010
                                                                                                                                                                      • Figure 87: Preferred location for bank branch, by age, July 2010
                                                                                                                                                                      • Figure 88: Preferred location for bank branch, by household income, July 2010
                                                                                                                                                                      • Figure 89: Preferred location for bank branch, by race/ethnicity, July 2010
                                                                                                                                                                      • Figure 90: Preferred location for bank branch, by area, July 2010
                                                                                                                                                                    • Be green, support my community
                                                                                                                                                                        • Figure 91: Importance of bank involvement in community and environment, by gender, July 2010
                                                                                                                                                                        • Figure 92: Importance of bank involvement in community and environment, by race/ethnicity, July 2010
                                                                                                                                                                      • Big disconnect between banking and purchase of insurance
                                                                                                                                                                          • Figure 93: Interest in buying insurance at a bank, by gender, July 2010
                                                                                                                                                                          • Figure 94: Interest in buying insurance at a bank, by age, July 2010
                                                                                                                                                                          • Figure 95: Interest in buying insurance at a bank, by race/ethnicity, July 2010
                                                                                                                                                                          • Figure 96: Interest in buying insurance at a bank, by children in household, July 2010
                                                                                                                                                                          • Figure 97: Interest in buying insurance at a bank, by region, July 2010
                                                                                                                                                                          • Figure 98: Interest in buying insurance at a bank, by area, July 2010
                                                                                                                                                                      • Cluster Analysis

                                                                                                                                                                          • Disengaged bankers
                                                                                                                                                                            • Characteristics
                                                                                                                                                                              • Demographics
                                                                                                                                                                                • Opportunity
                                                                                                                                                                                  • Rewarded nationalists
                                                                                                                                                                                    • Characteristics
                                                                                                                                                                                      • Demographics
                                                                                                                                                                                        • Opportunity
                                                                                                                                                                                          • Small is beautiful
                                                                                                                                                                                            • Characteristics
                                                                                                                                                                                              • Demographics
                                                                                                                                                                                                • Opportunity
                                                                                                                                                                                                  • Characteristic tables
                                                                                                                                                                                                    • Figure 99: Retail banker clusters, July 2010
                                                                                                                                                                                                    • Figure 100: Type of bank for savings account, by retail banking clusters, July 2010
                                                                                                                                                                                                    • Figure 101: Type of bank for checking account, by retail banking clusters, July 2010
                                                                                                                                                                                                    • Figure 102: Attitudes about banks, by retail banking clusters, July 2010
                                                                                                                                                                                                    • Figure 103: Attitudes about advertising and bill-pay, by retail banking clusters, July 2010
                                                                                                                                                                                                    • Figure 104: Types of financial products owned, by retail banking clusters, July 2010
                                                                                                                                                                                                    • Figure 105: Rewards programs used, by retail banking clusters, July 2010
                                                                                                                                                                                                    • Figure 106: Primary location for banking activities, by retail banking clusters, July 2010
                                                                                                                                                                                                  • Demographic tables
                                                                                                                                                                                                    • Figure 107: Retail banking clusters, by gender, July 2010
                                                                                                                                                                                                    • Figure 108: Retail banking clusters, by age, July 2010
                                                                                                                                                                                                    • Figure 109: Retail banking clusters, by household income, July 2010
                                                                                                                                                                                                    • Figure 110: Retail banking clusters, by race/ethnicity, July 2010
                                                                                                                                                                                                    • Figure 111: Retail banking clusters, by Hispanic origin, July 2010
                                                                                                                                                                                                  • Cluster methodology
                                                                                                                                                                                                  • Appendix: Trade Associations

                                                                                                                                                                                                    Companies Covered

                                                                                                                                                                                                    • AAA
                                                                                                                                                                                                    • Ally Financial Inc.
                                                                                                                                                                                                    • Amazon North America
                                                                                                                                                                                                    • American Automobile Association (AAA)
                                                                                                                                                                                                    • American Express Company (The)
                                                                                                                                                                                                    • Apple, Inc
                                                                                                                                                                                                    • Banco Bilbao Vizcaya Argentaria, S.A.
                                                                                                                                                                                                    • Bank of America Corporation
                                                                                                                                                                                                    • Bank of New York Mellon Corporation, The
                                                                                                                                                                                                    • Bank One Corporation
                                                                                                                                                                                                    • BB&T Corporation
                                                                                                                                                                                                    • Bear Stearns
                                                                                                                                                                                                    • BlackRock, Inc.
                                                                                                                                                                                                    • Bureau of Economic Analysis
                                                                                                                                                                                                    • Capital One Financial Corporation
                                                                                                                                                                                                    • Citibank
                                                                                                                                                                                                    • CitiFinancial
                                                                                                                                                                                                    • Citigroup Inc.
                                                                                                                                                                                                    • Citizens Financial Group, Inc.
                                                                                                                                                                                                    • Community State Bank
                                                                                                                                                                                                    • Consumer Bankers Association
                                                                                                                                                                                                    • Countrywide Financial Corporation
                                                                                                                                                                                                    • Credit Union National Association
                                                                                                                                                                                                    • Dell Inc.
                                                                                                                                                                                                    • Discover Financial Services Inc.
                                                                                                                                                                                                    • Facebook, Inc.
                                                                                                                                                                                                    • Federal Deposit Insurance Corporation
                                                                                                                                                                                                    • Federal Reserve System
                                                                                                                                                                                                    • Fifth Third Bancorp
                                                                                                                                                                                                    • First Franklin Financial Corporation
                                                                                                                                                                                                    • Fiserv, Inc.
                                                                                                                                                                                                    • FMR Corp.
                                                                                                                                                                                                    • General Motors Corporation
                                                                                                                                                                                                    • Goldman Sachs Group, Inc., The
                                                                                                                                                                                                    • Hart Associates
                                                                                                                                                                                                    • HSBC USA Inc.
                                                                                                                                                                                                    • Independent Community Bankers of America
                                                                                                                                                                                                    • ING Bank, fsb
                                                                                                                                                                                                    • JPMorgan Chase & Co
                                                                                                                                                                                                    • KeyBank Real Estate Capital
                                                                                                                                                                                                    • LIMRA International
                                                                                                                                                                                                    • MasterCard Incorporated
                                                                                                                                                                                                    • MBNA Corporation
                                                                                                                                                                                                    • Merrill Lynch & Co. Inc
                                                                                                                                                                                                    • Metro Bank
                                                                                                                                                                                                    • Mortgage Bankers Association (MBA)
                                                                                                                                                                                                    • NatCity Investments Inc.
                                                                                                                                                                                                    • National City Corporation
                                                                                                                                                                                                    • National Credit Union Administration
                                                                                                                                                                                                    • Navy Federal Credit Union
                                                                                                                                                                                                    • Northern Trust Corporation
                                                                                                                                                                                                    • RBS Greenwich Capital Markets, Inc.
                                                                                                                                                                                                    • Regions Financial Corporation
                                                                                                                                                                                                    • ShareBuilder Corp.
                                                                                                                                                                                                    • SunTrust Banks Inc.
                                                                                                                                                                                                    • TD Ameritrade Holding Corporation
                                                                                                                                                                                                    • The American Bankers Association
                                                                                                                                                                                                    • The American Financial Services Association
                                                                                                                                                                                                    • The Boston Consulting Group Inc.
                                                                                                                                                                                                    • The PNC Financial Services Group
                                                                                                                                                                                                    • Toronto-Dominion Bank
                                                                                                                                                                                                    • U.S. Bureau of Labor Statistics
                                                                                                                                                                                                    • U.S. Bureau of the Census
                                                                                                                                                                                                    • U.S. Green Building Council (USGBC)
                                                                                                                                                                                                    • U.S. Securities and Exchange Commission
                                                                                                                                                                                                    • Univision Communications Inc.
                                                                                                                                                                                                    • US Department of Commerce
                                                                                                                                                                                                    • US Department of Labor
                                                                                                                                                                                                    • USAA
                                                                                                                                                                                                    • Visa U.S.A. Inc.
                                                                                                                                                                                                    • Wachovia Corporation
                                                                                                                                                                                                    • Walmart Stores (USA)
                                                                                                                                                                                                    • Washington Mutual Inc
                                                                                                                                                                                                    • Wells Fargo & Company
                                                                                                                                                                                                    • Western Union Holdings, Inc

                                                                                                                                                                                                    Retail Banking - US - October 2010

                                                                                                                                                                                                    £3,174.67 (Excl.Tax)