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Wells Fargo picks up Mecklenburg market shareFeb 09, 2013 (The Charlotte Observer - McClatchy-Tribune Information Services via COMTEX) -- More than a year after completing its conversion of Charlotte-based Wachovia, Wells Fargo has rebuilt the market share it lost after the acquisition and now holds nearly one out of every four dollars that Mecklenburg County families and businesses have in their local deposit accounts. But Bank of America has held steady on its home turf, according to an Observer analysis of the most recent Federal Deposit Insurance Corp. data. Both gained at the expense of some of the Carolinas' community banks. Of 28 ZIP codes outside the Interstate 277 loop, Wells has the leading share in 16 of them. That's up from 11 in 2011, and the bank has picked up market share in affluent ZIP codes in Matthews, Mint Hill and South Park. Charlotte's hometown bank also can find some positive signs. Bank of America has the second-largest share in the county, a dominant position in Ballantyne and it has picked up share in other affluent areas. The data show that the public anger directed at big banks over everything from fees to foreclosures hasn't cost them market share in the city where they employ tens of thousands. The data also suggest that even in a digital world, brick-and-mortar branches still drive business. Both Wells Fargo and Bank of America benefit from their extensive branch networks in the county. In the early 2000s, banks competed for deposits to fund their growing loan portfolios, investments and expansions. Since the financial crisis, weak loan demand and minuscule interest rates have made deposits less profitable for banks. But deposit market share is still widely watched among bankers. It provides the best window available into how and where banks are competing for deposits -- and for relationships with customers. "Deposit growth is a good indicator of consumer satisfaction at the retail level of the bank," UNC Charlotte banking professor Tony Plath said. "Deposits are important because they proxy relationships. You're not going to get a change in relationships unless there's a change in deposits." The Observer used FDIC data to determine the banks' market share countywide, as well as the market share for the bank branches in individual ZIP codes. Banks typically record retail deposits where the account was opened or where it is most active, so the ZIP code data provide a window into where the competition is tightest. The Observer's review found: --Competition is especially keen in high-income ZIP codes like those around Dilworth and Myers Park (28207, 28211), Quail Hollow (28210), Olde Providence (28226), Mint Hill (28227), and Lake Norman (28031). --Wells Fargo has also gained share from BB&T and other banks in the fast-growing Steele Creek area (28273) and the gentrifying Plaza Midwood (28205). --In less affluent areas, customers have little to no choice if they want to open an account near their homes. Four ZIP codes in western Mecklenburg County and along I-85 in east Charlotte have two or fewer banks present. Two of those four have only a single branch. --BB&T, long a solid third place in market share in the region, does much better in the outskirts of the county where fewer competitors have offices. --Community banks' share has been declining over the last few years. They have, however, been able to maintain a collective presence. The Observer's analysis excludes branches with more than $500 million in deposits to get a better sense of competition at a typical location. Bank of America's corporate headquarters and regional headquarters of Wells Fargo and BB&T are therefore excluded. Those branches generally contain large nonlocal corporate deposits or collections of brokered deposits that can skew the numbers. Counting those "megabranches," Bank of America has 83 percent of the county's share, Wells Fargo has 12.5 percent, and only BB&T has more than 1 percent. The remaining data isn't perfect. It is collected based on a single day at the end of each June, and is thus only a snapshot. Banks also have some latitude to decide which deposits are recorded where. But the data is widely viewed as the most definitive comparison of banks' performance in a market. Wells Fargo Charlotte market president Kendall Alley says Wells uses the data to determine whether its branch network is operating efficiently and effectively. If Wells has 15 percent of the branches in an area, he said the bank wants to have at least 15 percent of its deposits. In fact, Wells Fargo's 47 branches with less than $500 million in deposits account for 20 percent of Mecklenburg County's branches. It has 25 percent of the deposits. Bank of America spokeswoman Nicole Nastacie said excluding the uptown ZIP codes means some of the Charlotte bank's local retail deposits were left out. She said that across the company, the bank saw "good growth" in deposits, amounting to 4.5 percent in the past year. The bank declined to comment further. How banks compete In general, banks compete on three things in any given market: location, customer service and rates, said Ken Thomas, a Miami-based independent banking consultant and economist. The most important of these is location, he said. It's true that people are doing more and more of their banking transactions online instead of coming into a branch. "But how is the decision made about where to open the account in the first place It's who has the most convenient location," said Thomas, who also operates the site BranchLocation.com. "You drive around Charlotte, who has the most locations as you drive to the mall It's going to be Wells Fargo and Bank of America. That's where you're opening your account." As the two banks built themselves into national powers, they also invested in prime branch locations that reap benefits for years, he said. Wells Fargo has also added a net two branches in the county since 2010, while Bank of America's net total has dropped by three, the FDIC data shows. Wells Fargo also has a slightly higher average deposit total per branch. Alley, the Wells market president in Charlotte, says his bank's success has come from a focus on service and a clean transition through the acquisition of Wachovia. "We did a really good job in our conversion around making sure customers knew what was going to happen. We didn't have a lot of customers lost in that conversion," Alley said. But that acquisition has also altered its path. Between 1994, the first year for which data was available, and 2001, First Union, NationsBank and BB&T each took turns as market leader outside of uptown. After First Union and Wachovia merged and kept the latter name, the combined bank put together a market share lead it would not relinquish. That nearly changed after the 2008 financial crisis when a crumbling Wachovia was scooped up by Wells Fargo. Desperate for liquidity, Wachovia had increased the interest it paid for deposits to bring in more cash. When Wells took over, it began to reset those prices back to a normal level -- leading some customers to move money elsewhere. Bank of America came within $160 million of reclaiming the top spot. Then, Wells Fargo began its comeback, increasing its market share from about 19 percent to the 25 percent it has now. That gain has occurred as the San Francisco bank brought to the East Coast its emphasis on "cross-selling" -- the term for selling multiple products to a household. Plath, the UNC Charlotte professor, said he thinks Wells Fargo picked up share based on the reputation Wachovia had for customer service. That could be fragile. The bank fell from the top spot this year in the well-regarded American Customer Satisfaction Index, the first time neither Wachovia or Wells has held it since 2001. Reflecting national trends Wells Fargo's performance in Charlotte is mirrored at the national level. Using a similar methodology to the Observer's, research firm SNL Financial found in October that Wells had the leading market share in the country when banks' "megabranches" are excluded, at 9.83 percent. Bank of America came in second at the national level as well. When all deposits were included, across the country as in Charlotte, Bank of America was ranked No. 1. The big banks have been able to increase their market share despite public anger at big banks and well-publicized customer threats to take their business to smaller institutions, particularly after Bank of America announced plans to introduce a $5 debit card fee in fall 2011. Even though the Charlotte bank scrapped the idea, a number of online movements -- most notably Bank Transfer Day -- urged people to put money in community banks and credit unions. Those two groups touted some success. But the data shows that massive shifts never materialized. Across the country, the 10 largest banks were able to pick up market share faster than their smaller competitors, SNL analyst Fahad Mir said. "Too-big-to-fail, they're just getting bigger," he said. Still, both Wells Fargo's and Bank of America's performance in Mecklenburg County is markedly better than in a number of metropolitan areas around the country. While there haven't been any monumental shifts, the two big banks have lost some ground in cities from New York City and Washington, D.C., to Tampa, Fla., and Richmond, Va., according to FDIC data. That undoubtedly reflects the number of people who work for or with the banks in Charlotte, Plath said. Wells Fargo employs about 20,500 in the city, while Bank of America has about 15,000 workers here. "This is a hometown market," he said. Dunn: 704-358-5235 Twitter: @andrew_dunn ___ (c)2013 The Charlotte Observer (Charlotte, N.C.) 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