Commercial Banks
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 4,260 commercial banks in the US earn money by lending money at higher interest rates than the interest they pay to depositors. They may also earn money from fees and interest on credit card services, returns on investments in securities, fees for investment services, fees for treasury management services, and other account fees.
Burden of Regulatory Compliance Costs
The banking industry is highly regulated and regulations increased significantly following the financial crisis of 2008.
Fintech Competition Forces Innovation
Banks are seeing new competition from fintech start-ups, which have received tens of billions of dollars in venture capital funding over the past five years.
Industry size & Structure
The average commercial bank has 328 employees and generates $130 million in annual revenue.
- There are 4,260 FDIC-insured commercial banks in the US. FDIC-insured banks have around 1.4 million employees, over $566 billion in annual revenue.
- The FDIC-insured commercial banks in the US hold almost $24 trillion in assets.
- There are about 4,560 FDIC-insured community banks that serve local markets and typically have less than $1 billion in assets. These community banks have over 392,700 employees and $2.5 trillion in assets.
- There are 776 FDIC-insured commercial banks with $1 billion to $10 billion in assets.
- There are 138 FDIC-insured commercial banks with $10 billion to $250 billion in assets.
- There are 13 FDIC-insured commercial banks with over $250 billion in assets. These banks are defined as systemically important financial institutions (SIFI) under the revisions to the Dodd-Frank Act and are subject to more stringent regulation.
- The largest US commercial banks by assets are JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, US Bancorp, TD Group US Holdings, and PNC Financial Services Group.
Industry Forecast
Commercial Banks Industry Growth
Recent Developments
Jul 18, 2024 - Employment Decreases, Wages Increase
- Commercial banking industry employment decreased slightly during the first five months of 2024 while wages for nonsupervisory employees increased slightly, according to the US Bureau of Labor Statistics (BLS). Commercial banks slightly increased their prices during the first five months of 2024, according to the BLS. Commercial banking industry sales are forecast to grow at a 3.99% compounded annual rate from 2024 to 2028, comparable to the growth of the overall economy, according to Inforum and the Interindustry Economic Research Fund, Inc.
- Some lenders may need to increase their reserves to cover the possibility of losses on commercial real estate loans, according to a recent analysis by Moody's Ratings. A Moody's loan-by-loan analysis of 41 anonymous banks' commercial real estate portfolios found that banks' underwriting was more conservative than the ratings firm had anticipated but the higher-for-longer interest rate environment is increasing the need for banks to shore up their capital, said Stephen Lynch, vice president and senior credit officer at Moody's. Moody's found that, on average, the banks should be holding about twice the amount of reserves they currently have to cover potential office losses.
- Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported full-year 2023 net income of $256.9 billion, down $6 billion (2.3%) from the prior year, and fourth quarter 2023 net income of $38.4 billion, down $30 billion (43.9%) from the prior quarter. Full-year 2023 net income remained well above the levels reported before the coronavirus pandemic, however. The net income decrease from the prior quarter was driven by higher noninterest and provision expenses and lower noninterest income, according to the FDIC.
- US banks closed some 222 branches in the first two months of 2024, according to the US Office of the Comptroller of the Currency. Bank of America, US Bank, and Citizens collectively accounted for nearly half of the closures - 92 over eight weeks. Banks are capitalizing on the capabilities of online banking, according to Steven Reider, founder and president of Bancography, a consulting firm that advises banks on branch planning and strategies. Online banking can lead to significant savings since the average freestanding bank branch costs around $2.6 million a year, according to Reider. Bank of America's 41 closures might have saved it almost $100 million in just two months.
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