The old saying that death and taxes are the only certainties
in life should include a third certainty.
Eventually, every one of us is going to pay bank
No matter how careful you are with your finances or how much
effort you put into switching banks to avoid fees, eventually you
will be hit with some kind of fee. It's one of the prime reasons
that banks have become such financial powerhouses in the United
Sometimes these fees can be ridiculous. A friend of mine -- an
accountant, no less -- recently had an episode in which the
direct deposit to his checking account was delayed for a week.
Not knowing the money wasn't available, he paid his major bills
then started using his debit card for everyday small expenses
like coffee and lunch.
Suddenly, his card was rejected at a sushi shop. Calling his
bank, he discovered he was overdrawn by $900 -- with $530 of the
overdrawn amount due to overdraft and insufficient fund fees.
Needless to say, this made him tremendously upset, as it was
through no fault of his own that a glitch had delayed the direct
My friend explained the situation to his personal banker at
the local branch. He was credited back half of the fees, but he
was warned that the credit was a one-time courtesy and that it
wouldn't be granted again. Needless to say, my friend promptly
switched banks and feels pretty bitter toward his original
My friend isn't alone in his negative feelings toward his
bank. A recent study by management consultancy CG42 revealed that
these negative feelings may have an extremely negative effect on
the bottom lines of the top 10 banks. CG42 surveyed nearly 3,700
customers and used the Brand Vulnerability Index (BVI) to measure
consumer sentiment with each financial institution.
The survey found that 26% of bank customers are not happy with
their current institution. Among the top 10 banks, this level of
dissatisfaction equates to a projected total of $627 billion in
consumer deposits being in play -- that is, at risk of being
pulled out of those banks. Out of that amount, $92 billion is
expected to exit the coffers of the top 10 in the next year --
along with $5 billion in revenue.
Where's this money going to go? Clearly, it's not going into
consumer's mattresses, and the majority will not be flowing to
offshore institutions. The majority of these funds is likely to
go into small regional banks and credit union-type institutions
(such as one regional bank I'll be writing about this week).
Do investors need to worry about this potential capital shift
among and out of the top 10 U.S. banks? Let's take a closer look
at the study and the technical picture of the best, worst and the
middle of the list.
The study ranked the most vulnerable banks in this order:
This list indicates that
scored the worst in terms of the Brand Vulnerability Index. This
means Citibank is expected to lose the most in deposits over the
next year. TD Bank scored the best, meaning TD would be the least
negatively affected by consumer frustrations and shifting
deposits. In other words, TD has the least consumer
dissatisfaction among the banks on the list, and Citibank has the
A look at the technical picture of Citibank reveals a
near-perfect double top on the daily chart at $53. Price is
descending from the far right top; support exists in the $45
range. Given the BVI ranking and the bearish chart pattern, I
would avoid this stock unless resistance at $53 gets taken out on
a daily close.
Capital One (
as an example of the middle of the BVI rank, it has been trending
strongly upward since mid-April. However, resistance has been hit
in the $69 range. This is a very bullish chart pattern and buying
on a daily break out close above $69 makes technical sense.
Not surprisingly, the best-ranked bank on the BVI shows the
most bullish chart pattern.
TD Bank (
has also been trending sharply upward since June 24. The chart
says there is more upside to go thus buying now at $86 makes
Risks to Consider:
The BVI study is only a snapshot of consumer banking
sentiment. It should not be used by itself as a decision tool. In
addition, the numbers cited are projections, and not fact.
Regardless of the issues, the study does provide a starting point
and guidance for starting your own research. Always consider the
current fundamental and technical picture of stocks you're
thinking about buying. In addition, always use position size and
stop-loss orders properly.
Action to Take -->
With reference to the technical picture and the BVI study,
avoiding Citibank and buying TD Bank makes sense right now.