Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



The Little-Known Way Wells Fargo & Co. Tops Bank of America Corp.

Think all of the biggest banks are the same? Think again.

One of the least exciting parts about a bank is its deposits. Although the four biggest banks in America -- JPMorgan Chase (NYSE: JPM  ) , Bank of America (NYSE: BAC  ) , Wells Fargo (NYSE: WFC  ) , and Citigroup (NYSE: C  ) -- have more than $4.5 trillion in deposits at last count, few investors would suggest it's something they keep an eye on.

But it turns out the deposits arena is one more where Wells Fargo once again tops its peers, and it actually means billions to its bottom line.

Impressive growth
A quick glance at the growth in deposits of the biggest banks over the past year reveals that Wells Fargo has added more to its deposits ($84 billion) than Bank of America and Citigroup combined:


Q1 2013

Q1 2014


Growth (%)

Wells Fargo





JPMorgan Chase





Bank of America










Source: Company investor relations

This growth is undoubtedly a good thing, but it's critical to remember that deposits at banks are a liability and are the principal way they borrow money.

At their core, banks are used to safely hold money from consumers and in turn pool that money together to lend it back out. The banks charge interest on the loans, but they also have to pay interest themselves to the people and institutions they're borrowing from.

What banks pay to customers is minuscule, and it's a wildly inexpensive and effective way to borrow money. And it turns out it's here where Wells Fargo once more delivers an incredible lead.

The staggering lead
At its latest investor day, Wells Fargo revealed a chart showing how it funds itself relative to its peers: 

Source: Company investor relations.

Wells Fargo has an impressive lead in its ability to fund itself through the wildly cheap deposits. And as a result of having such an impressive amount of its funding from deposits, it saved itself billions in the first quarter alone:

Source: Company investor relations.

In the case of Bank of America, if 70% of its funding came from deposits (on which it paid just 0.16%) instead of other sources, a back-of-the-envelope calculation reveals that it would've saved an amazing $750 million in the first quarter alone.

Or if you'd like to think of it a little differently, if Wells Fargo paid 0.76% on its liabilities -- the average of JPMorgan Chase, Bank of America, and Citigroup -- it would've shelled out an addition $1.6 billion in interest payments through the first three months of the year.

Wells Fargo has a number of compelling ways in which it beats out its three biggest peers, and while it may not be the most exciting, its leadership in funding itself through wildly cheap deposits is one more to add to the list.

Big banking's little $20.8 trillion secret
The secret in banking doesn't simply stop at the success of Wells Fargo. In fact, there's a brand-new company that's revolutionizing banking, and is poised to kill the hated traditional bricks-and-mortar banks. That's bad for them, but great for investors. And amazingly, despite its rapid growth, this company is still flying under Wall Street's radar. To learn about about this company, click here to access our new special free report.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2967389, ~/Articles/ArticleHandler.aspx, 9/4/2015 3:59:49 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Patrick Morris

After a few stints in banking and corporate finance, Patrick joined the Motley Fool as a writer covering the financial sector. He's scaled back his everyday writing a bit, but he's always happy to opine on the latest headline news surrounding Berkshire Hathaway, Warren Buffett and all things personal finance.

Today's Market

updated 6 hours ago Sponsored by:
DOW 16,374.76 23.38 0.14%
S&P 500 1,951.13 2.27 0.12%
NASD 4,733.50 -16.48 -0.35%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/3/2015 4:01 PM
BAC $15.94 Up +0.09 +0.57%
Bank of America CAPS Rating: ****
C $51.79 Up +0.04 +0.08%
Citigroup Inc CAPS Rating: ***
JPM $62.68 Up +0.11 +0.18%
JPMorgan Chase & C… CAPS Rating: ****
WFC $52.43 Up +0.44 +0.85%
Wells Fargo CAPS Rating: *****