Among banks, the battle for deposits is clearly divided into two camps: The major banks that own astonishing chunks of the market share, and the dozens of community banks that work to snap up what remains.
Through the first six months of the year, about 60 percent of the marketshare in Massachusetts went to national or larger regional institutions, according to recently released data from the FDIC. That leaves 40 percent for a group of mostly community banks, the majority of which occupy a fraction of a percent of the market. On those levels, moving up a few tenths of a percent equals a fairly sizable shift.
Thanks in part to a dwindling number of banks overall, many community institutions absorbed more of the overall market from 2009 to 2010. But a handful of banks continued to eat more than their share, often through acquisitions or by aggressively expanding branch networks. And many have been on a growth trajectory for several years.
Moving On Up
East Boston Savings Bank, for example, went to 0.66 percent market share in June 2010 from 0.52 percent in 2009, the year in which it finished its acquisition of Mt. Washington Bank. But even in merger-free years, East Boston has grown steadily, moving up from 0.41 percent of the market in 2007 – a more than 60 percent bump in market share between 2007 and 2010.
East Boston president and CEO Richard Gavegnano credits the growth to his bank’s expansion strategy and customer service. He also noted that there’s something to be said for having a big presence in one’s own corner of the market: Although the FDIC numbers couldn’t confirm it, he estimated his bank probably owns three-quarters of the market within East Boston itself.
Danversbank, which has been making acquisitions and building branches as well, went to 0.97 percent of the market in 2010 from 0.54 percent in 2007 – a huge increase of more than 80 percent. Medford-based Century Bank & Trust, which recently posted a 36 percent year-over-year increase in year-to-date earnings, owns 0.90 percent of the deposit market in 2010, well above the 0.64 percent it occupied in 2007.
Barry Sloan, CEO of Century, said the bank has been expanding its business on multiple fronts. It’s also added to its branch network, with three new offices in the past several years – although he noted that it takes several years to build a branch to its full potential.
“Our branches are well ahead of budget,” and commercial business has grown significantly thanks to giant banks’ weakening positions, Sloan said.
Out of state banks are also making their presence felt locally.
One major up-and-comer is Connecticut-based People’s United Bank, which, through several acquisitions, went from nonexistent in Massachusetts in 2007 to owning 0.56 percent this year. Webster Bank, People’s United’s peer in the Connecticut market, dropped in Massachusetts market share over the same period, going from 0.72 percent in 2007 to 0.68 percent in 2010.
The race for deposits is particularly important now, said Jim Jones, president of First Wellesley Consulting Group. With low interest rates, deposits are a cheap way to build assets, which are needed to fuel growth. The cost of business is continuing to rise, and using banks’ own deposits is preferable to borrowing money elsewhere, Jones said.
