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The United States savings bank market has been decimated by a decline in deposits and exposure to subprime mortgages during the past five years. Industry participants, which include savings and loan associations, savings institutions and thrifts, experienced a stagnation in deposits over the period, while commercial bank deposits have grown more than 8% annually in comparison.
In the five years to 2012, revenue fell at an average annual rate of 5.2% to $82.2 billion. A decline in deposits and the effects of the subprime crisis led to this slowdown
Savings banks have been losing deposits to commercial banks, which has dealt a critical blow to industry operators, since lending out these deposits at a higher rate drives the majority of revenue. Subprime loan exposure has hammered banks' balance sheets, causing large write-downs and profit losses.
Consolidation is a major trend that has affected the industry during the past five years and will continue to trouble operators. In 2008, the industry's largest player, Washington Mutual, failed because a lack of consumer confidence led to a 10.0% fall in deposits.
This fall in consumer confidence was a result of huge subprime loan losses. Also in 2008, industry players IndyMac and Downey Savings failed, representing the fourth and 13th largest bank failures in US history, respectively.
More than 150 banks have failed since 2008, causing the number of firms to drop in 2008 and 2009. This trend is expected to continue as the commercial banking structure absorbs savings banks in the coming years. Industry consolidation will contribute to declining revenue.
In the five years to 2017, savings institutions will continue to feel the effects of the subprime crisis and lose deposits to commercial banks. Increases in commercial real estate defaults will increase the stress on operators' balance sheets, and the industry will be unable to compete with larger, multifunctional commercial banks.
For more information on the US savings bank market, see the latest research: US Savings Bank Market
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