Superregional Banks Industry Trends

Industry Consolidation

In the past 10 years, the number of commercial banks in the US dropped by almost 30 percent. Large economies of scale in banking operations have encouraged consolidation, which has produced several dozen very large banks with more than $50 billion in assets. Smaller banks are still able to thrive by providing personal attention smaller customers don't get from large institutions.

Expansion of Subprime Lending

Commercial and industrial loans have become a less important source of revenue for banks, partly because large corporations now have direct access to capital markets. In the last 15 years, the proportion of such loans in commercial bank loan portfolios fell from 30 percent to 20 percent. During the same period, real estate loans rose from 45 percent to 55 percent.

Electronic Fraud and Identity Theft

Identity theft is the fastest-growing financial crime in the US. The cost is largely borne by banks rather than consumers. Security standards implemented as part of the USA Patriot Act may deter some types of fraud, but the increasing volume of Internet commerce will probably increase fraud losses.

Evolution of ATM Networks

Automated teller machines have allowed banks to extend basic operations over a wider area, at much lower cost than opening branches. Close to 300,000 ATMs are in service in the US, handling about 25 percent of all retail banking transactions. The number of ATMs has been rising but the transaction volume per ATM has declined. The monthly cost of operating an off-premises ATM is about $1,000.