The Changing Commercial Banking Industry Structure

Published - Jun 2002| Analyst - Christina Granville| Code - IFT012B
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Report Highlights

  • Total banking assets are expected to climb at an average annual growth rate (AAGR) of 7.1% from $6,772 billion in 2001 to $9,537 billion in 2006.
  • Total commercial banking product assets, consisting of insurance, securities, mortgages, mutual funds, and consumer credit, will rise from $25,530 billion in 2001 to $38,115 billion in 2006.
  • Commercial banks will increase their share of the market, rising from 23.7% in 2001 to 25% in 2006.
  • Growth will be highest from diversified financial products whose market will rise at an AAGR of 9.9% through 2006, while commercial banks will increase their share to 19.1% from 16.4%.
  • Deposit-related income will grow more slowly at an AAGR of only 2.1%, and commercial banks will see their share slip 2% through the period.

INTRODUCTION

STUDY GOALS AND OBJECTIVES

The objective of this report is to reflect upon changes that have occurred in the commercial banking industry over the past several years and to assess where the industry is headed over the next 5 years. As the "click-and-mortar" world of the Internet has continued to pose challenge to the traditional "brick-and mortar" banking sphere, this report will evaluate how successfully established banking products have evolved to encompass new technology. It will, as well, predict how the industry will adapt to continuing deregulation, industry consolidation, and shifts in borrowing and lending patterns.

In addition to examining the extent to which the traditional commercial banking industry and products have evolved and will continue to expand, this report will evaluate the burgeoning competitive field opened by new technology. It will quantify the strength of these nontraditional-and often nonbanking-competitors in various product areas, assess where they are headed in the future, and what challenges they pose to more traditional products and/or product delivery.

This report will also evaluate the psychology of the commercial banking customer and the extent to which he or she seeks and, in the future, will seek products from the e-marketplace. The report will examine whether a new breed of customer expects seamless electronic service as they interact with an organization across multiple channels or whether human contact at the branch level is still considered preferable.

This report will examine the liquidity crisis and the extent to which that may have played a role in encouraging commercial banks to seek additional revenue through offering a wider diversification of financial service products. Specific commercial banking product areas to be examined include: credit cards, debit cards, smart cards, paper checks/electronic bill presentment, mortgages, insurance, brokerage services, venture capital, and mutual funds. This report will evaluate what products and which applications of those products will prosper and decline over the next 5 years, assess why, and address the implications for the each product marketplace in general and commercial banking specifically.

This report will also look at strategic partnerships between traditional commercial banks and new technology counterparts. It will evaluate several of the cross industry mergers of the past decade, examining whether mega-mergers pose a threat to smaller community banks.

REASONS FOR DOING THE STUDY

The financial services industry has been radically transformed by applications of new technology. In this environment of constant flux, this study will take a look at where commercial banking stands compared to the financial services industry and what product developments and trends will affect the commercial banking industry over the next 5 years.

This report will estimate the growth of commercial banking industry products and industry leaders. In addition, it will examine technological advancements and predict how they will affect various areas of commercial banking over the next 5 years.

CONTRIBUTION OF THE STUDY AND FOR WHOM

This study examines the current state of the commercial banking industry and projects where the industry will stand from 2001 to 2006. It addresses the technological advancements that are affecting the industry and gauges how well traditional institutions are adjusting and strategizing in light of them. It compares and contrasts international institutions with those of the U.S. and also assesses non-bank competitors in the commercial banking arena

SCOPE, FORMAT, AND METHODOLOGY

This report addresses top leaders in each area of commercial banking, their products and the competitive marketplace for those products. It looks at historical growth and makes projections for products, for the industry as a whole and compares and contrasts the industry with other financial service providers. Future projections are based upon anticipated growth trends.

INFORMATION SOURCES

The information was gathered from regulatory agencies and industry sources fully detailed in the appendix of this report.

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