This is marketing research on the Banking industry and can include information on the background, market structure, definitions, competitors, trends and developments of banking and is related to finance, investments, savings and loans and thrifts.

Table of Contents

[edit] Background

Insured commercial banks enjoyed great success in the 1990s as well as since 2000. Net income for the 8,774 commercial banks insured by the Federal Deposit Insurance Corporation (FDIC) rose to around $70 billion in the late 1990s. That increase in earnings reflected strong growth in non-interest revenues and interest-earning assets and a relatively benign credit-quality environment.

Domestic economic conditions remained highly favorable for bank performance after 2000 as the Federal Reserve lowered interest rates after the economic downturn triggered by the dot-com bubble. This action caused a boom in construction as well as lending in the middle of the decade. Unfortunately, many of the largest commercial banks including Citigroup, Bank of America, Wachovia and Wells-Fargo were caught in the subprime-mortgage storm which has recently unfolded. Although many banks were able to package loans and get them off their books, two new types of mortgage vehicles – structured investment vehicles (SIVs) as well as collateralized debt obligations (CDOs) have come back to them.

As of late 2007, the easy credit atmosphere prevalent earlier in the decade has come back to cause considerable problems for commercial banks. Citigroup alone could see write-offs of $15 billion while the other banks listed above will also see losses mounting into the billions from SIV and CDO obligations.

[edit] Market Structure

Commercial banks had expanded considerably in the period of easy credit at the turn of the decade. The number of establishments increased approximately 15% in the 5 years leading up to 2002.

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Employment gains have mirrored the general recent prosperity of the industry. This is a very large industry and employment in commercial banking is now not far from 2 million workers in the U.S.

The industry is moderately to highly concentrated after recent years of consolidation. The 20 largest players now account for more than 50% of all industry revenues.

Concentration of Revenue by number of firms in the industry is as follows:


Total Number of firms       Revenue as % of all firms in the industry

     4 largest                              29.5%
     8 largest                              41.9%
    20 largest                              56.3%
    50 largest                              70.9%

[edit] Market Metrics

As indicated, prosperity in commercial banking has a major impact on the general U.S. economy. The industry in the U.S. accounts for about a half trillion in annual revenue.

[edit] Industry Players

These are major players in this market, but it is not an exhaustive list of all key firms.

Revenues, Net Income and Market Capitalization are expressed in US$ Billions.

    Company              Location		  Revenue        Net Inc  Profit      Market Cap

Bank of America         Charlotte, NC	           117B		   21B	   18.0%	191B
Citigroup	        New York, NY, NY	   146B		   21B	   14.5%	154B	
JP Morgan Chase         NY, NY		            64B            16B	   25.0%	153B
Wells-Fargo	        San Francisco, CA	    35B		    9B	   26.4%	102B
Wachovia		Charlotte, NC	            32B		    8B	   25.0%         72B

[edit] Recent Trends and Developments

The prospects for commercial banks around 2000 were generally favorable. To the extent that overseas economies in Asia and elsewhere rebounded from their 1998 problems, the profitability of banks’ international operations were expected to improve as well. A lower level of volatility in foreign exchange and interest rate markets continued to contribute to a recovery in trading revenues. Modest increases in domestic interest rates also had a positive near-term impact on banks’ net interest margins.

These good times have ended in 2007. As indicated above, late 2007 has witnessed an unprecedented drying up of credit available in the market. Due to the financial catastrophe associated with SIV and CDO obligations of leading commercial banks, the outlook has become very unclear for banks and a possible recession in the U.S. in 2008 has contributed to a recent pull back in both share prices and valuations for leading American commercial banks.

In addition, some analysts predict that U.S. dominance, especially in market capitalization, will be challenged in the coming years as economies in Europe and Japan improve and banks there become more bottom-line-oriented. The same analysts argue that after years of pruning their operations, U.S. banks are limited in their ability to sustain substantial earnings growth. Challenging the rise of European and Japanese banks’ prospects, other analysts foresee difficulty for them in becoming more efficient because local laws prohibit massive layoffs or make them prohibitively expensive.

[edit] Sources

• Most current US government sources