Deposit Market Share - Importance of This Metric

Importance of This Metric

This metric is considered by many to be an important banking performance measure although many regard it as is misleading for the following reasons:

• FDIC insured deposits have been for the past twenty years growing smaller and smaller as bank customers have elected to put their funds into stocks, bonds, mutual funds, and annuities. The amount in mutual funds is double the amount in bank accounts, the amount of money in Money Market Funds is the same as in checking accounts. These businesses are as profitable or even more so to the financial services company then normal bank accounts, so if customers are moving money from a particular bank's normal bank accounts to bank-owned mutual funds, the bank does not lose anything. If one was only looking at deposit market shares however, it would appear to shrink.

• Deposit market share does not include credit unions.

• Deposit market share gives no indication as to how many other financial products and services a particular bank's depositors might be buying from that bank. For example, Bank X might have a 10% deposit market share, yet if all those depositers simply have checking accounts and nothing else with that Bank, it would make nowhere near as much money as Bank Y in the same market, who might have 2% deposit market share yet successfully sell mutual funds, mortgages, and insurance.