What Does the Fiscal Cliff Mean for Bank Deposits?

by tom 12. December 2012 11:28

According to our latest research findings, if U.S. tax cuts are allowed to expire at the end of 2012, the average bank account will decrease by an average of almost 55 percent.

The research findings were reported this week in American Banker. According to our research, the average bank account would decrease by $2,600 from $4,782. That represents the amount of added federal income tax the average household would have to pay according to the Tax Estimates Center. As reported in American Banker:fiscalcliff_121015_thelmalouise

"If the tax cuts will not be extended into next year consumers will have nearly half the amount available for savings as they did in the past decade," said Dan Geller, executive vice president at Market Rates Insight.

According to our latest deposit research, consumer savings in bank accounts, excluding business and institutional accounts, increased to $8.2 trillion in December 2012, up from $3.8 trillion in December 2001. When you consider there are 82.8 million households with banking relationships in the United States, that makes the average annual bank savings per household to $4,782 per year.

Weekly Term Accounts APY Spread and Index–December 10

by tom 10. December 2012 18:35

American Banker and Market Rates Insight feature a weekly APY Spread and Premium indices to provide pricing executives with greater insight into national pricing trends and practices.

APY Spread Index
The APY spread is a simplified form of a standard deviation.  It measures the variance between the high and low ends of the price range to the average, which indicates whether the APY of a particular CD is closer to the low or the high end of the pricing spectrum.

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Premium Index  
Premiums are used as the main vehicle to drive balances towards the most desired deposit products, and are an indication of the capital strategy of each individual institution. This week’s highest and lowest national premiums:

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Weekly Term Accounts APY Spread and Premium Index–December 3

by tom 3. December 2012 21:10

American Banker and Market Rates Insight feature a weekly APY Spread and Premium indices to provide pricing executives with greater insight into national pricing trends and practices.  

APY Spread Index
The APY spread is a simplified form of a standard deviation.  It measures the variance between the high and low ends of the price range to the average, which indicates whether the APY of a particular CD is closer to the low or the high end of the pricing spectrum.

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Premium Index  
Premiums are used as the main vehicle to drive balances towards the most desired deposit products, and are an indication of the capital strategy of each individual institution. This week’s highest and lowest national premiums:

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Wells Fargo CEO Discusses Why Americans are Saving More

by tom 30. November 2012 11:06

This week, CNN Money posted an interview from Fortune this week with Wells Fargo CEO John Stumpf about trends in banking. Stumpf observed that there has been a noted shift in American savings habits, and that Americans are saving more than ever, despite low interest rates.

“Here's the thing that a lot of policymakers fail to understand. Consumers carry a lot more debt than they used to -- in 20 years it's gone from $4 trillion or $5 trillion to $14 trillion. But the cost of carrying that debt is back to what it was in the early '90s because interest rates are so low. And people are saving now like they've never saved before....

“Even at incredibly low rates. In fact we think there's something between $1.5 trillion and $2 trillion on businesses' and consumers' balance sheets that is sitting in our vaults. I've never seen it like this before. I've never seen the deposit growth the way we have it, and it's not because the yields are so high. It's security.”

And consumers are looking to pay off debt. According to Stumpf, consumers are only spending on what they need, and they are working to pay off mortgages and reduce their debt because of nervousness about the future of the economy:

“People and businesses are spending money on things they need, but they're not investing for the future in many cases. They're putting off decisions. In fact -- this is a surprise to most people -- in half the mortgages that will be made this year, people will either bring money to the closing -- a cash-in refi -- or use the reduced rate to shorten the term and keep the payment the same. They're paying off debt. They're deleveraging -- there's too much uncertainty right now.”

For banks and credit unions, the trick is to get consumers to save with them. Wells Fargo is currently America’s largest bank with the highest market cap -- recently stated to be $170 billion. According Stumpf, Wells Fargo became the largest by establishing deep relationships with consumers and small to mid-sized businesses. It’s the largest mortgage lender, underwriting loans for one-third of American homes. Stumpf says the secret to Wells Fargo’s success is cross-selling:

“Because the way we think about the business is helping customers succeed financially and satisfying all their needs. How can you do that if you only want to pick out one piece? We think that when customers have a deep, long-term relationship with us, we get to know them, they get to know us, and we can see their entire financial situation.

“It's so much easier to sell somebody the sixth product when they already have five with you and you can give them a better deal. Today we have over six products per retail household on average. A third or a fourth of our customers already have eight products or more. And we're still scratching the surface.”

To promote relationship selling, you have to understand what consumers want from their bank or credit union. We have been examining new ways that banks can attract customers with new products that consumers want and need. Our most recent research shows that consumers want (and more importantly will pay for) services such as credit score reporting, identify theft alerts, personalized couponing, overdraft protection, and mobile deposits. We call these Lifestyle Financial Services products, since they are service products that consumers find useful, and are willing to pay for.

As Stumpf says, when you already have a customer buying one or two products, it’s easier to sell them a third. Clearly, to attract today’s customers, banks and credit unions need the right mix of products designed to help customers save money and pay down their debt at the same time.

Weekly Term Accounts APY Spread and Premium Index–November 26

by tom 26. November 2012 18:19

American Banker and Market Rates Insight feature a weekly APY Spread and Premium indices to provide pricing executives with greater insight into national pricing trends and practices.  

APY Spread Index
The APY spread is a simplified form of a standard deviation.  It measures the variance between the high and low ends of the price range to the average, which indicates whether the APY of a particular CD is closer to the low or the high end of the pricing spectrum.

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Premium Index  
Premiums are used as the main vehicle to drive balances towards the most desired deposit products, and are an indication of the capital strategy of each individual institution. This week’s highest and lowest national premiums:

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APY | Banking Trends | Blog | CD Balances | National Pricing Indicator

Weekly Term Accounts APY Spread and Premium Index–November 19

by tom 19. November 2012 20:14

American Banker and Market Rates Insight feature a weekly APY Spread and Premium indices to provide pricing executives with greater insight into national pricing trends and practices.  

APY Spread Index
The APY spread is a simplified form of a standard deviation.  It measures the variance between the high and low ends of the price range to the average, which indicates whether the APY of a particular CD is closer to the low or the high end of the pricing spectrum.

image

Premium Index  
Premiums are used as the main vehicle to drive balances towards the most desired deposit products, and are an indication of the capital strategy of each individual institution. This week’s highest and lowest national premiums:

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The Limited Impact of Unlimited Deposit Insurance

by tom 16. November 2012 11:53

The soon-to-expire unlimited deposit insurance coverage for noninterest-bearing transaction accounts had a marginal impact on balances over $250,000. That’s the latest analysis from MRI Executive Vice President Dan Geller, as published recently in BAI. Here’s a copy of his article:

Analysis of the temporary unlimited deposit insurance coverage for noninterest-bearing transaction accounts (NIBTAs) shows that this program had a greater psychological than practical impact on deposit customers. Therefore, it is not very likely that institutions will see a substantial change in deposit behavior after the expiration of the program on December 31.

Looking at the year and a half of reported FDIC data, from the enactment of the program on December 31, 2010 until June 30, 2012, the increase in the average balance per NIBTA over http://www.bai.org/BANKINGSTRATEGIES/img/category/sales_tn.gif$250,000 was only 25% compared with an increase of 11% in the average balance of all deposit accounts (checking, savings, money markets and certificates of deposit) over $250,000. Thus, the marginal increase in the average balance of NIBTAs was only 14%.

During the 18 months following the enactment of the program until June 30, 2012, balances of all deposit accounts exceeding the $250,000 limit increased by $934 billion, or 30.2%, compared with an increase of $560 billion, or 55.1%, in balances of NIBTAs over $250,000. Here, again, we see that the marginal increase of program balances vs. “normal” balances is only about 25%.

Additionally, during the same time period, the number of NIBTAs exceeding the $250,000 limit increased by 149,347 compared to an increase of 427,119 in all deposit accounts exceeding the limit. This means that 65% of all deposit accounts over $250,000 would have exceeded the insurance limit even if the unlimited insurance program did not exist.

Based on the ratio of 35% program growth vs. 65% “normal” growth in balances of deposit accounts over $250,000, it is reasonable to conclude that section 343 of the Dodd-Frank Act had a marginal impact on reassuring customers about the safety of their deposits over and beyond the confidence level customers have in FDIC-insured institutions under normal circumstances.

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Weekly Term Accounts APY Spread and Premium Index-November 12

by tom 12. November 2012 17:14

American Banker and Market Rates Insight feature a weekly APY Spread and Premium indices to provide pricing executives with greater insight into national pricing trends and practices.

APY Spread Index
The APY spread is a simplified form of a standard deviation. It measures the variance between the high and low ends of the price range to the average, which indicates whether the APY of a particular CD is closer to the low or the high end of the pricing spectrum.

image

Premium Index
Premiums are used as the main vehicle to drive balances towards the most desired deposit products, and are an indication of the capital strategy of each individual institution. This week’s highest and lowest national premiums:

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This Just In–New Report Shows Prepaid Cards are on the Rise

by tom 6. November 2012 20:56

According to an article on the American Banker web site, prepaid cards are gaining ground with banks. In an article entitled “More Banks Offering or Looking at Prepaid Cards,” Kevin Wack reports on a recent survey conducted by the Mercator Advisory Group:

“A new survey of 310 banks conducted on behalf of the American Bankers Association finds that slightly more than 50 percent of them have either started offering or are in the process of evaluating prepaid cards. Of banks that have begun offering prepaid cards, 58 percent believe the regulatory environment has warmed to such products, while fewer than one in four banks that opted not to offer prepaid cards said they viewed the regulatory environment as either favorable or very favorable.”

In issuing the report, Ben Jackson, senior analyst, Mercator Advisory Group's Prepaid Advisory Service who wrote the report, said:

"Due to thin margins, prepaid programs depend on volume for profitability. So, getting cards into many hands is critical to success. Program managers, whether handling open-loop or closed-loop cards, have a variety of distribution options. Understanding those options requires a grasp of both business and technological considerations.”

Our own recent research shows that more than 47 percent of consumers want prepaid cards from their banks and credit unions. And what’s more, these services increase share of wallet as consumers keep coming back for additional services. What is making prepaid cards popular with smaller institutions(American Banker reports that the majority of those surveyed had less than $1 billion in assets) isn’t just the revenue from prepaid cards, but the possibility of selling additional services and products and promoting greater customer loyalty. So even with thin margins, prepaid cards could offer one means to bring more customers into the bank for other services.

Are prepaid cards part of your roadmap? We would love to hear your thoughts.

Weekly Term Accounts APY Spread and Premium Index-November 5

by tom 5. November 2012 22:17

American Banker and Market Rates Insight feature a weekly APY Spread and Premium indices to provide pricing executives with greater insight into national pricing trends and practices.

APY Spread Index
The APY spread is a simplified form of a standard deviation. It measures the variance between the high and low ends of the price range to the average, which indicates whether the APY of a particular CD is closer to the low or the high end of the pricing spectrum.

image

Premium Index
Premiums are used as the main vehicle to drive balances towards the most desired deposit products, and are an indication of the capital strategy of each individual institution. This week’s highest and lowest national premiums:

image

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