Quantipulation: Online Banks' Deposit Growth

American Banker ran an article titled Online Banks’ Deposits Grow at Quadruple Industry Pace which stated:

Among the nation’s largest stand-alone direct banks, deposits have increased by 70% since the first quarter of 2008 to a combined $330 billion as of Sept. 30, or roughly four times the industrywide pace. Even for ING Direct, the largest and most established Internet deposit business, deposit growth of 27% since the first quarter of 2008 to $82 billion at Sept. 30 was far ahead of industrywide growth of 17% to about $10 trillion.

My take: The online banks may have grown far faster than other FIs (70% vs. 17%), but given the smaller base of deposits, that’s not very hard to do. In fact, if AB wanted to further sweeten the online banks’ story, it could have mentioned that their market share of deposits grew from 2.3% in 2008 to 3.3% in 2011 — a 43% jump in market share.

Ah, but now I’m the one quantipulating.

There is another side to this story, however.

Based on the numbers presented by the article, the online banks captured just 9% of the industry’s total deposit growth from 2008 to 2011. Meanwhile the top 5 banks (JPMC, C, BofA, WF, USBank) captured 40% of the deposit growth (my estimate is based on adding Wachovia into the WF numbers, and Wamu into the JPMC total).

While AB points out that the online banks’ growth rate is four times greater than the industry pace, it fails to mention that the top 5 banks’ deposit growth ($, not %) is four times greater than the online banks’ increase. In addition, as the online banks’ share of the total market grew from 2.3% to 3.3%, the top 5 banks’ share remained constant at 41%.

What it means: 1) Despite the “safety scare” of 2008-2009, and the “move your money” and other negative sentiment toward large banks in 2011, the top 5 banks are weathering the industry’s storm, at least from a deposits perspective; and 2) The online banks’ gains would appear to come at the expense of credit unions and community banks.

Oh, and the other thing it means is that, if you’re going to quantipulate, remember that there’s probably another side to the story. 

This article was originally published on . All content © 2022 by The Financial Brand and may not be reproduced by any means without permission.