1 More Reason Big Banks Will Keep Only Getting Bigger

Bank of America, JPMorgan Chase, Citigroup, and Wells Fargo are the biggest banks in the U.S., and a recent study reveals why they will only continue to grow.

Feb 7, 2014 at 7:00AM

If you hate big banks, I've got some bad news for you.

The latest data reveals the grip the four biggest banks have on the American consumer is only poised to tighten as the years progress.

Staggering size
At the end of the third quarter, the Federal Deposit Insurance Corporation noted the four biggest banks by deposits in the United States were, unsurprisingly, Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC)JPMorgan Chase (NYSE:JPM), and Citigroup (NYSE:C). While they represented only 0.06% of such institutions -- there were 6,891 banks in the U.S. at last count -- those banks held 37.3% of the total deposits in the United States:

Bank Deposits In the U.S. | Create Infographics.

Staggering growth
Not only are these banks big already, but they're getting bigger. A quick glance at total deposit growth reveals the four top banks in total added $180 billion in deposits (domestically and internationally) from the end of 2012 to the end of 2013:

Source: Company earnings reports.

While it isn't an exact comparison, a bank with $180 billion in deposits would be the ninth largest bank in the U.S.

The reasons for their colossal size and growth are endless. From their presence in every market, a full suite of products and offerings to consumers and businesses alike, their ability to be true beneficiaries of economies of scale, and countless other things, there is no refuting the reality that these banks are big now and will only continue to grow as the years progress.

Staggering potential
In addition to all of that, a new J.D. Power retail banking study revealed 34% of the customers at the six biggest banks in the U.S. were designated as Generation Y, also known as Millennials -- the individuals who were born from the early 1980s to the early 2000s. This compares to just 25% of customers at regional, midsized, and community banks. It went on to note: 

And while the Generation Y segment is currently less-affluent than other segments, they do present potential bottom-line growth as their income levels increase and they enter the market for mortgages, education plans for children, loans, etc.

The ability of Big Banks to provide functional "digital banking technology" (website, mobile, advanced ATMs) is attractive to tech-savvy younger customers, and smaller institutions need to be competitive in this space in order to "steal" younger customers from Big Banks.

This is important because when a person considers an investment, he or she must look at both past performance but also understand future directions and trends. The biggest banks appear to have a strong hold on the younger generation poised to begin using the full scale of bank services as they enter the prime of their careers. This could be one more reason why these institutions will only continue to become more profitable and larger as the years progress.

Many companies are lauded because they appeal to younger consumers and are thought of as being harbingers of the new frontier, or of having the biggest potential for growth because of the demographics of their customers. The biggest banks are also due some of that excitement.

The banking revolution
As technology advances, it will bring about big changes in every industry. While that's not great news for consumers, it certainly creates opportunity for savvy investors. That's because there's a brand-new company that's revolutionizing banking, and it's poised to kill the hated traditional brick-and-mortar banking model. And amazingly, despite its rapid growth, this company is still flying under the radar of Wall Street. For the name and details on this company, click here to access our new special free report.

Patrick Morris owns shares of Bank of America. The Motley Fool recommends Bank of America and Wells Fargo. The Motley Fool owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

Something big just happened

I don't know about you, but I always pay attention when one of the best growth investors in the world gives me a stock tip. Motley Fool co-founder David Gardner (whose growth-stock newsletter was rated #1 in the world by The Wall Street Journal)* and his brother, Motley Fool CEO Tom Gardner, just revealed two brand new stock recommendations moments ago. Together, they've tripled the stock market's return over 12+ years. And while timing isn't everything, the history of Tom and David's stock picks shows that it pays to get in early on their ideas.

Click here to be among the first people to hear about David and Tom's newest stock recommendations.

*"Look Who's on Top Now" appeared in The Wall Street Journal which references Hulbert's rankings of the best performing stock picking newsletters over a 5-year period from 2008-2013.