Here’s Why Everyone’s Wrong About Big Banks
It’s been nearly six years since the bankruptcy of financial giant Lehman Brothers, an event that triggered a chain reaction of Chapter 11 filings from some of the biggest banks on Wall Street and pulled the country into the Great Recession. More than half a decade out, as the country limps to recovery, you could forgive the walking wounded for being a little wary of big banks. Pundits and politicos have reliably taken up the charge, with countless op-eds asking the same question: Are banks too big to be jailed?
In spite of this, public opinion is shifting. A recent Nielsen survey found that the reputation of big banks has improved significantly in the last several years, with the number of positive ratings for financial institutions nearly doubling, from 17 to 32 percent. Several of the biggest banks in the country — Bank of America, Goldman Sachs, JPMorgan Chase, Citigroup and Wells Fargo — all saw improvements.
GOBankingRates investigated why more Americans like big banks now, finding that the answer is yoked to why they’ve always liked them: Because big banks pay big dividends, and not just to their customers.
We surveyed the biggest bank headquartered in every state and the District of Columbia, based on assets (a reliable indicator of size given that the six largest banks in the country own 67 percent of the financial system’s assets), investigating each bank on a number of factors:
- Accessibility and technology: how many branches and ATMs each offers; the extended hours of each organization; online and mobile banking technology
- Economic impact: the amount of taxes each bank pays; the number of workers each employs
- Social impact: community outreach within each company; charitable donations
What we found jibes with increasingly favorable public opinion, but flies in the face of the stigma of the big, bad bank: Big banks actually make huge contributions to their regions that smaller institutions just don’t have the heft to make.
They employ millions, pay billions in taxes and offer the highest level of accessibility. In fact, many of the biggest institutions headquartered in each start are community banks, serving a specific region and its residents.
In short, big banks play an integral role in the financial health of their communities — a larger one than they’re often given credit for.
Accessibility and Technology
One of the most obvious draws of big banks is widespread in-network and branch accessibility. This means fewer out-of-network banking fees and greater access to funds — whether at a brick-and-mortar institution, an in-network ATM, or through online and mobile banking technology.
Big banks also offer the most impressive banking technology, which is increasingly important to today’s user base. More than half of all American adults have smartphones1, and more and more of them are using their devices to bank online. In fact, the largest share of banking customers in the U.S. — baby boomers — is also one of the most digitally conscious groups. Nearly three-quarters of all baby boomers use online banking services weekly, right in line with younger generations.
With the level of accessibility that only big banks can provide, consumers can better manage their money, track their spending and monitor fraud. In short — it pays to be a big bank customer.
Branch and ATM Access
- Ally Bank, the biggest bank in Utah, is online-only, offering no brick-and-mortar bank locations. However, Ally tops its competitors in terms of ATM access. The bank doesn’t charge fees for using any ATM nationwide, which means customers have access to some 425,000 ATM locations in the United States.
- Wells Fargo, the biggest bank in California, offers 829 branches within the state alone, and 6,200 in 39 states across the country — the most domestic branches of any bank on the list.
- Bank of America has branches in all 50 states and 40 countries around the world.
Big banks don’t just provide accessibility and support to the regions in which they’re headquartered, either; because of their claim to fame — a widespread network — big banks are able to provide individualized support to any number of communities. Take Chase, for example; headquartered in New York, the bank is active in every state, including Utah.
“With a diverse and vibrant economy, Utah’s future is bright and Chase is proud to be the neighborhood bank for over 425,000 customers across the state,” said Craig Zollinger, JPMorgan Chase market president and CEO for Utah. “We serve thousands of Utahans through our 65 branches and over 140 ATMs, as well as through our award-winning online banking, giving customers a variety of services that help them use and manage Chase accounts virtually anywhere. We continue to be there in support of small businesses throughout Utah, making a difference locally by extending $156 million in credit through over 3,200 loans in 2013.”
BMO Harris Bank, Camden National Bank, Capital One, Chase Bank, Fifth Third Bank, First Tennessee Bank, PNC Bank, TD Bank, U.S. Bank and Wells Fargo are among the 45 big banks that offer weekend hours either in-branch or drive-thru hours, 24/7 customer service or night deposits.
Online and Mobile Banking Technology
All 51 big banks surveyed have online banking services; 48 provide mobile banking access through mobile applications for smartphones. Other stand-out services that popped up in the survey included telephone, text banking and online brokerage services. These mobile and online products help customers more closely monitor their account activity, prevent fraud and manage their wealth responsibly.
“We take a holistic approach to our investments in the state and providing support and funding for entrepreneurship and innovation has always been central to our community investment efforts,” said Jon Witter, president of retail and direct banking at Capital One. “This year, we invested $150 million to open a new data center in the state of Virginia that will enable us to build essential IT infrastructure capabilities to help us meet customer needs in the increasingly digital world of banking. Our work with local entrepreneurs provides a platform for us to help area businesses and, at the same time, advance efforts to promote job growth and economic vitality in our communities.”
Big banks are major figures in the stock and housing markets, but they also have a sweeping impact on employment and state tax revenue, contributing jobs and money without which many of these states would struggle to function.
Corporate State Taxes
Based off the corporate tax income rates in every state, we found that big banks are contributing upwards of a few hundred million to a few billion dollars in state taxes annually.
- At the top of the list, Wells Fargo likely paid roughly $1.9 billion in California state taxes in 2013.
- Chase Bank paid around $1.2 billion in New York taxes in 2013.
- Bank of America paid $788 million to North Carolina.
- PNC Bank, Capital One, Discover Bank, TD Bank and U.S. Bank all paid over $100 million in state taxes in Pennsylvania, Virginia, Delaware, New Jersey and Minnesota, respectively.
- The top six banks in this survey pay around $4.8 billion in state taxes annually.
In the immediate aftermath of the Recession, unemployment skyrocketed from 5 percent in December of 2007 to 10 percent in October of 2009.
Ironically, however, the cavalcade of federal reforms that followed the Recession in quick succession has also created a glut of new jobs at big banks, as a 2013 study from Forbes and job search engine Indeed.com found. Increased regulations have boosted the need for more risk managers, compliance officers and all manner of mortgage bankers.
Aside from new positions, big banks already employ hundreds of thousands of people — greatly exceeding even the biggest employers among smaller financial institutions.
- At the top, Wells Fargo employs nearly 265,000 people.
- Chase Bank comes in second place with roughly 255,000 employees.
- Bank of America employs 242,000 people.
- TD Bank employs nearly 78,750 individuals.
- U.S. Bank, PNC Bank, BMO Harris Bank, Capital One, SunTrust Bank, Regions Bank, Fifth Third Bank, Citizens Bank and Discover Bank all employ over 10,000 employees each.
All told, the 51 largest banks employ 1.23 million people — almost 1 percent of the U.S. workforce.
“We just celebrated our 162nd anniversary in this state, and with more than 49,000 team members who live here, and over 1,000 locations, we continue to work hard to make sure the customers and communities we serve are successful,” said Lisa Stevens, Wells Fargo regional president for California. “One way we do this is by demonstrating our commitment to small businesses. California needs small business to grow, add jobs and prosper for our economy to grow. We’re helping business owners access the capital and financial services they need to operate their businesses and thrive. … We approved a record $440 million in SBA 7(a) loans for California small businesses in federal fiscal year 2013 and remained the state’s top SBA lender in dollar volume for the eighth straight year.”
Many big banks offer financial literacy courses, videos and materials to help their customers strengthen their fiscal knowledge. (If anything, the Recession has proven that solid money management skills on an individual level benefit the community as a whole.)
Beyond that, all 51 biggest banks have charitable causes they support — a fact that’s not often brought up in the discussion of these institutions. In fact, we found most big banks are using their capital to do great things.
“Bank of America’s history in North Carolina began more than 130 years ago,” said Charles Bowman, North Carolina and Charlotte market president for Bank of America. “Today we’re connecting with neighborhoods and communities and investing in the economy of North Carolina through philanthropy and volunteerism. We help local nonprofit organizations develop and grow by focusing our funding on addressing housing, jobs and hunger, three areas important to the vitality of North Carolina.”
A few notable contributions include:
- In 2013, Wells Fargo gave $275.5 million to 18,500 nonprofit organizations and schools nationwide.
- In the last five years, TD Bank has donated upwards of $300 million to over 6,000 organizations.
- JPMorgan Chase announced a $100 million, five-year commitment to support and accelerate Detroit’s economic recovery and strengthen its communities.
- In 2013, Capital One donated $45 million to nonprofit and community organizations, committing nearly 250,000 hours in volunteer service.
- In 2013, U.S. Bank donated $43.1 million to education, economic opportunities, arts and culture, and United Way.
“PNC has long been committed to serving not only our customers and shareholders, but also the communities where our employees live and work,” said Marcey Zwiebel, vice president and senior manager at PNC Bank. “Our single, largest philanthropic focus in the 19 states and the District of Columbia in which we operate is through PNC Grow Up Great. Recognizing that learning during a child’s early years is essential for their long-term success, we introduced a $350 million, multi-year, Grow Up Great bilingual initiative in 2004 to help prepare children from birth to age 5 for success in school and life.”
Big banks are often thought of on a national scale — after all, they certainly have that reach. Our study, however, uncovered the numerous ways these institutions prop up their local communities — through charity, through outreach, through taxes and employment. Account holders might not be aware of the myriad ways their banks support themselves and their state, but, as poll numbers show, they still trust big banks with more than just their banking.
1. Pew Research Center: “Cell phone ownership hits 91% of adults,” Lee Raine. June 6, 2013
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