Other banks question accuracy of FDIC study
In the past year, two of Rhode Island’s oldest banks grabbed more market share in the state while newcomers lost ground, according to a Federal Deposit Insurance Corporation report released late last month.
Citizens Bank of Rhode Island and The Washington Trust Company, both headquartered here since the 1800s, emerged as the only two banks, among those with more than $1 billion in deposits in the state, to post market-share growth during the one-year period ended June 30. (This excludes MetLife Bank, an online deposit holder with a processing facility here).
Meanwhile, the FDIC study said Bank of America and Sovereign Bank, both out-of-state companies that entered the market in recent years through acquisitions, reported declined deposits and market share during the year.
However, some banking officials in the state question the report’s accuracy.
Overall, total deposits at the state’s 25 banks increased from $19.88 billion to $21.83 billion (or by $1.94 billion) during the year. But $1.2 billion of it went to No. 1 deposit holder Citizens, the report said.
Joseph J. MarcAurele, president and CEO of Citizens Bank of Rhode Island, attributed the spike in deposits to the bank’s emphasis on customer service and, through branches in local Stop & Shop supermarkets, staying open every day. Also, the bank boasts the largest banking network in the state with 78 branches and 146 ATMs, he noted.
“In a state like Rhode Island,” MarcAurele added, “that really produces tremendous synergies and convenience for our customers.”
Citizens Bank, owned by the Royal Bank of Scotland plc, claimed 43.23 percent of the state’s banking market this year, with total deposits of $9.45 billion. It improved 1.8 percent from the 41.5 percent market share reported on June 30, 2004.
According to an Oct. 27 bank statement, Citizens benefited from several “brand awareness” initiatives during the year. The bank attracted customers with free iPods, gift cards and gasoline, while remaining the No. 1 Small Business Administration lender in the state, the statement said.
Like Citizens, Washington Trust’s road to improving market share during the year was paved with a focus on customer service, the Westerly-based bank said.
“Part of it is paying attention to the customer,” said John C. Warren, the bank’s CEO. “Everything we do is about people, and the better we do to get the word out, the more responsive (customers) are in terms of deposits coming in.”
Washington Trust, the fifth-largest deposit holder in the state with $1.47 billion, added $180.37 million in deposits during the year. The growth improved the bank’s market share from 6.48 percent to 6.73 percent.
Warren said all Washington Trust branches reported increased deposits, yet he pointed to growth from the bank’s recent expansion into Greater Providence. The bank’s new branch, on Route 117 in Warwick, saw deposits jump from $44 million to $79.8 million during the year, he noted.
While executives from Citizens and Washington Trust embraced the FDIC numbers, representatives from major banks shown to have lost market share questioned the report’s value as a true reflection of each bank’s deposits.
The report said Bank of America, which acquired FleetBoston Financial Corp. and its Rhode Island branches in 2003, lost $186.35 million in deposits during the year. Its market share dropped from 21.85 percent to 19.05 percent.
Ernesto C. Anguilla, a spokesman for the Charlotte, N.C.-based bank, explained that the loss in deposits was due in part to how the former Fleet branches report account information to the FDIC under the new ownership.
Funds in large commercial accounts, Anguilla said, now show up in markets in which companies are headquartered rather than the states where offices are located. This gave the appearance of a loss in market share for the bank’s Rhode Island branches.
“(The FDIC report) is not a 100-percent accurate reflection of where we are in the market,” Anguilla said.
Steven J. Issa, president and CEO of Sovereign’s Rhode Island operations, attributed his bank’s loss in deposits in the FDIC report to a change in reporting methods as well.
Issa said the bank had credited deposits from three specialty lending units to the Rhode Island market, in which they operate. But since the last FDIC report in June 2004, Sovereign decided to report those deposits from the market in which the customer, rather than the lending unit, is located, Issa said.
“That was about a $100 million impact,” he said, “and another $75 million (in deposits) went into alternative investment products.”
Take out those impacts, Issa noted, “and we’re actually up 9 percent comparable period over comparable period.”
According to the FDIC figures, Pennsylvania-based Sovereign’s deposits declined in Rhode Island from $1.87 billion to $1.8 billion, and its 9.42-percent market share reported last year fell to 8.25 percent.
Differences in how banks report deposits do, in fact, appear to blur the state’s market-share picture.
“We leave it up to the banks to decide how they want to report the deposits to us,” said David Barr, a spokesman for the FDIC.
The FDIC requires banks to report deposits by branch every year, Barr said. But the reports from each branch lack explanations for increases or decreases in deposits.
“We require them to report the deposits,” Barr said, “we don’t require how they report the deposits.”
Banking executives point to another factor muddying the FDIC’s market-share numbers for Rhode Island.
MetLife Bank, a mostly Web- and telephone-based bank headquartered in New Jersey, has a processing center in West Warwick from which the company has reported deposits to the FDIC since 2004. The facility’s deposits come from all over the country, however.
The online bank’s deposits spiraled upward from $1.02 billion last year to $1.76 billion this year, giving the bank an 8.08-percent market share in the state that accounted for a big chunk of the state market’s overall growth this year.
Including MetLife Bank in the FDIC’s Rhode Island calculation shrinks every other bank’s market share figures. And though mid-sized banks such as Washington Trust, Bank Rhode Island and BankNewport all posted deposit growth this year, they ranked below MetLIife.
