Banks and Credit Unions Industry Profile

The US banking industry includes about 6,800 commercial banks, 1,200 savings banks, and 8,000 credit unions with combined annual revenue of about $600 billion. Major companies include commercial banks Bank of America, Citibank, JPMorgan Chase, and Wells Fargo; savings bank ING Direct; and Navy Federal Credit Union. The industry is concentrated: the 50 largest firms generate more than 60 percent of revenue. Commercial banks account for about 80 percent of industry revenue; savings banks, 15 percent; and credit unions, 5 percent.

COMPETITIVE LANDSCAPE

Demand for banking services is closely tied to economic activity and the level of interest rates. The profitability of individual banks depends on marketing skills, efficient operations, and good risk management. Large economies of scale exist in some segments of the industry, which has encouraged industry consolidation. Smaller banks can compete successfully in segments where customer service or knowledge of the local market is more important.

Many banks and thrifts aggressively offered adjustable rate and subprime mortgages during the housing boom of the early 2000s only to find themselves saddled with loan defaults and extensive losses when the housing bubble burst. Deep exposure to subprime mortgages and mortgage-backed securities caused bank failures, government takeovers, and involuntary mergers.

PRODUCTS, OPERATIONS & TECHNOLOGY

Major products are bank loans, account services, brokerage services, credit card and leasing services, trust management, and investment services. Bank loans provide 54 percent of industry revenue, account services provide 10 percent, the other major ...