COMMENTARY

Peter Burgess

Consumers Fed Up With Biggest Banks Are Looking For Change

• --New study says $185 billion, or 9%, of deposits could leave top 10 banks in next year
• --Separate poll shows only 45% of customers trust their banks
• --Banks say they are working on improving customer service

In the nation's top 10 banks, $185 billion in deposits could leave in the next year, according to a study by cg42, a small consulting firm. Meanwhile, a Harris Interactive poll found only 45% of customers trust their bank.

While the debit-card fee disaster and Saturday's planned Bank Transfer Day protest have shown in sensational terms the anger facing banks, the more mundane shortfalls in customer relations are damaging too.

With regulations on bank charges and a new consumer-financial watchdog in Washington, banks are struggling to find profitable relationships. Annoyed consumers looking to leave aren't the answer.

To be sure, banking customers are notoriously loath to change--the cg42 study says 60% think it's too much of a hassle--and even $185 billion is only 9% of total deposits. But the polls indicate stickiness may be coming a bit unglued.

'You can look at these numbers in one of two ways, which is 'Eh, I get that we are vulnerable, but ... it's my belief that my acquisitions will overcome that,'' said Steve Beck, cg42's managing partner. 'I think what we are seeing is it can't.'

Consumer anger was on full display after Bank of America Corp. (BAC) and others announced plans to charge for debit cards. Consumers, including President Barack Obama, spoke out and banks quickly backpedaled.

'There is no question it's been a feeding frenzy,' said Richard Hunt, president of the Consumer Bankers Association. 'We just have to reconnect with our customers and be clearer with consumers, telling them about the value we provide.'

The Harris Interactive poll, conducted in the midst of the turmoil, found 17% of customers weren't likely to stay with their current bank. Harris executive Carol Gstalder saw consumers, particularly using social media, talking more.

In its first study, cg42 determined one-fifth of all customers are considering changing. About 8.7% are projected to move in the next year.

Bank of America ranked as the most vulnerable, with some 10% of customers, or $42 billion in deposits, possibly leaving. Its customers were most likely to leave for being 'nickel and dimed,' cg42 said.

Citigroup Inc. (C) and Wells Fargo & Co. (WFC) each had over 9% of their customers at risk, the study says, while J.P. Morgan Chase & Co. (JPM) had 8.9%. PNC Financial Services Group Inc. (PNC) scored the best at 7.4%.

Bank of America and Citigroup declined to comment.

A Wells Fargo spokeswoman said, 'We understand Americans are looking for more from their financial institutions during these difficult economic times, and we are listening to what our customers are saying.'

A J.P. Morgan spokeswoman pointed to 7% growth in retail deposits in the third quarter and said it sees customer satisfaction at a historic high. 'We are on a path to improve the customer experience across Chase and have a ways to go but feel good about our momentum.'

The numbers might not be as bad as they look: Banks should add customers to offset those who leave. Many would likely switch among the top banks, despite the Saturday push for customers to transfer deposits to credit unions.

Banks have seen deposits pouring in recently, but that pertains to economic fears, which increases the value of cash.

Wells Fargo Chief Financial Officer Tim Sloan said at a conference Thursday the bank's 8% deposit growth in the third quarter was a flight to quality but couldn't hypothesize how long the deposits will stay.

As Wells Fargo often says, banks need relationships to increase revenue. Sloan said Wells is willing to let its margin suffer for relationships with customers to whom it can pitch mortgages, credit cards and other products.

Laurent Desmangles, a partner at Boston Consulting Group, said banks are catching on.

'Successful banks are going to be the ones that do a better job of building their value propositions and understanding customer needs,' Desmangles said. 'I think it's fair to say that every major bank is actively looking to do better on those lines.'

-By David Benoit, Dow Jones Newswires; 212-416-2458; david.benoit@dowjones