The public may be angry at bailouts, and the national banks that received them, but relatively few Tucsonans are punishing the big banks by taking their money elsewhere.
Only one of the three national companies that dominate Tucson’s banking scene has lost significant market share since the financial crisis hit in 2008, data from the Federal Deposit Insurance Corp. show. At the same time, Tucson’s smaller banks have not gained significant market share.
Credit unions, however, are continuing to grow, and there are signs they are incrementally taking business from big banks.
“One would think people are quite upset, but if you really look at the numbers, the upset or the anger has not produced a major change in the way people conduct their business,” said Paul Stull, senior vice president at Arizona State Credit Union and a member of the board of directors for the Marketing Association of Credit Unions. “It appears there has been a lot of talk and not a lot of action.”
But small banks and credit unions have used the crisis to try to win new customers from big banks, and some are switching.
One is John Praytor, a 63-year-old retiree who lives in Sahuarita. Praytor got angry with Chase Bank, he said, because it continued to charge him after he paid off his mortgage in full.
“That prompted me to say, ‘Enough of the banks!’ ” Praytor said.
He split from Chase, canceled three credit cards linked to big banks and closed a checking account with Wells Fargo, then moved his money to Tucson Federal Credit Union. His reasoning: It is local and has a branch in Sahuarita.
In doing so, Praytor was unwittingly following the advice of some, mostly liberal, activists who began a campaign a year ago encouraging people to “Move Your Money” to smaller, local institutions.
The critique of American mega-banks rose to a new level in July, when a social-investment fund, the Appleseeed Fund, grouped five of the country’s biggest banks with companies that make money from pornography, tobacco and weapons as socially risky and unworthy of investment.
“They’re being managed in an irresponsible way,” said Christen Farrey the fund’s director of sales. “They’re privatizing the profits and putting the taxpayers on the hook for their losses. We think that’s irresponsible.”
While Tucsonans are not moving their money en masse, it’s possible that could change. The new financial reforms laws signed in July are going into effect, and in response some banks are charging customers for services they previously received for free. Bank of America, for example, has a new Internet-based checking account that charges holders $8.95 to see a teller at a branch or receive a paper statement.
A few dominant banks
Arizona’s consumer banking market has long been dominated by a few big players, even if in past decades they were headquartered in Phoenix, not Charlotte, N.C., San Francisco and New York City.
In the early 1980s, David Zacharias was CEO of Great Western Bank, a community bank based in Phoenix (different from a bank by the same name operating in Arizona today). Now a Phoenix banking consultant, Zacharias recalled that three state or regional banks dominated Arizona at the time: First Interstate Bank, Valley National Bank, and Arizona Bank. Since then, all three have been absorbed into mega banks based out of state: Wells Fargo, Chase and Bank of America.
Those three now dominate Tucson’s banking market, the FDIC’s measure of deposits shows. As of June 30, Wells Fargo had a 27.46 percent share of the local market, Chase’s share was 21.15 percent and Bank of America’s was 15.18 percent. Compass Bank, a regional institution based in Alabama, had a 10 percent market share.
All three of the biggest banks received billion-dollar bailouts from the federal government as part of the Troubled Asset Relief Program, and all three have paid them back, with profits going to the government.
Bank of America is the only one of the largest banks in the Tucson area that has seen its share of deposits drop. It went from 20.12 percent in 2008 to 15.18 percent this year.
In an e-mail, Bank of America spokeswoman Colleen Haggerty attributed the drop to corporate deposits shifting from state to state and on the banks placing customers in money-market accounts or other products not covered by FDIC insurance.
hometown credit unions
Small banks and credit unions have long sold themselves as the hometown favorite, with roots in the community and a bank president who sits in your branch — “Kind of like the banking from ‘It’s a Wonderful Life,’ ” said Ray Lancaster, president of Pyramid Federal Credit Union in Tucson.
The recent bad news about big banks has given credit unions an opportunity to get their traditional message across, said Michael Hudson, a consultant who runs the website CreditUnionStrategy.Com
“Many credit unions have worked very hard to differentiate themselves from banks, not in the marketing sense, but in the service sense,” Hudson said. “Credit unions have taken this as an opportunity to remind the customer of the difference.”
Pyramid Federal Credit Union went a little beyond the traditional message in radio ads this year. It said that big banks “charge you outrageous fees and they take big risks.” Pyramid offers “unmatched personal banking” the ad went on, “and a clear conscience.”
It concluded: “The solution’s simple. Move your money.”
Pyramid President Lancaster said credit unions still have to follow through by giving customers lower fees, more personal service and local control.
“You have to have a value proposition that improves the life of your customer,” he said.
Nationwide, the public seems to be embracing credit unions, but in a way that is not costing big banks much business. U.S. credit unions had an estimated 9.2 percent share of the household savings market at the end of 2008, and by September of this year, that had risen to 10 percent, said Pat Keefe, a spokesman for the Credit Union National Association.
The credit unions’ share of the consumer loan market has gone from 9.1 percent at the end of 2008, to 9.3 percent in September, peaking at 9.6 percent at the end of 2009, Keefe said.
Still, the banking industry is continuing a long battle against what it contends are unfair advantages given to credit unions, notably their tax-exempt status.
“Credit unions want it both ways,” said John Hall of the American Bankers Association. “They want special privileges of being a nonprofit, but they want to expand their powers to do everything a bank does and yet not pay taxes.”
limits on banks
Public anger about bailouts may not have moved a lot of money so far, but it’s possible the crisis will bring business to smaller institutions via a more indirect route. The crisis prompted Congress to pass a vast new set of financial laws that are forcing especially big banks to make visible changes to some consumer accounts.
The new laws limit how much banks can charge retailers for “interchange fees,” which are charged whenever a customer swipes a debit or credit card at a store. They also limit overdraft fees and other charges that have brought big banks a lot of revenue.
Bank of America estimated it could lose up to $2.3 billion in annual revenue from the new restrictions on debit-card fees.
JPMorgan Chase said in its third-quarter earnings announcement, released Oct. 13, that it expects an annual $2 billion hit due to the new financial laws, including $700 million a year in reduced revenue from overdraft and non-sufficient fund fees.
As a result, many big banks are increasingly charging for services checking customers used to see as free. Hence the $8.95 fee Bank of America will charge holders of its new eBanking account for seeing a teller or for receiving a paper bank statement.
“Less than 10 percent of our checking customers will see a change in the monthly maintenance fee they pay. However, for the bank to succeed in this new environment, we are changing the way we do business,” Bank of America spokeswoman Haggerty said. “One way we are doing this is moving to a more straightforward pricing structure that better reflects the value of the services we provide.”
This presents a continuing opportunity, said Michael Hannley, president of the Bank of Tucson. Customers are “coming in droves,” he said.
In fact, FDIC data show that the community bank’s deposits have grown 29 percent since 2008, although the bank’s market share has remained flat.
Since community banks tend to charge fewer fees, he said, “the 12,000 page document that the Congress approved really has not affected us tremendously.”
Contact reporter Tim Steller at 520-807-8427 or firstname.lastname@example.org.
Contact reporter Alex Dalenberg at 520-807-8429 or email@example.com