Magazine article American Banker

Midsize Banks Score Best in Profit-per-Client Study

Magazine article American Banker

Midsize Banks Score Best in Profit-per-Client Study

Article excerpt

A new study shows midsize banks have the edge in making money from their retail customers.

Banks in the $10 billion to $35 billion category led the industry with $153 of profit per customer last year, according to Andersen Consulting. Those with less than $10 billion of assets earned only $108; "large" banks, with $35 billion to $80 billion of assets, made $134; and "super-large banks," with assets of more than $80 billion, made only $113 per customer, the firm said Thursday.

The result highlights the difficulty the biggest banks have faced keeping customers happy after megamergers, as well as the problem the smaller ones face making fixed costs pay off over a smaller customer base.

The midsize banks "are running pretty tight shops," said Rainer Famulla, the Andersen partner responsible for the survey. "They just do a lot with the customer base. They do develop personal relationships.

"It's clear that if you're very large, the scale isn't given to you automatically at all," he added. "It's something you really have to work for."

In addition to their fixed-cost problem, the smallest banks' relationships are less profitable because they tend to provide only one services to each customer, such as a checking or savings account, Mr. Famulla said.

Joseph A. Stieven, a bank analyst at Stifel, Nicolaus & Co. in St. Louis, said the results support his view that midsize banks have the greatest profit potential. "All these banks that acquired the No. …

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