For the top 30 banks, most deposit growth in recent years has come through acquisitions, not organic growth, according to James M. McCormick, president of First Manhattan Consulting Group.

Of the 15.5% growth in checking and savings deposits between 1993 and 1999, only 0.4% was internal, while the rest came through acquisitions, he said.

And deposits remain the main driver of retail profitability, while specialty products, though growing, make up a low percentage of banking companies' profits, Mr. McCormick said in a keynote address Tuesday to investors at a conference in New York hosted by Putnam Lovell Securities.

"Core deposits are a wonderful source of profit," since 16% of consumer assets are held in transaction and saving accounts, he said. These accounts produce 51% of revenues and 66% of annual pretax bank profits, and 35% of banking profits in 1999 came from consumers, Mr. McCormick said.

But with the slowdown in organic deposit growth, banking companies have been forced to find ways to revitalize their consumer franchise, which some bankers consider a dull business, he said.

"Four years ago, you heard from bankers at conferences that they are planning to close 40% of their branches," he said. "That would have been a dumb thing to do. It's the consumer, stupid."

There are ways to build deposits organically, Mr. McCormick said. Banking companies can improve their level of customer service, expand the number of branches, and establish more offsite automated teller machines, he said. All of these steps would help boost deposit growth, he said.

Mr. McCormick pointed to Commerce Bancorp of Cherry Hill, N.J., which he said does a good job in the area of customer service and convenience. But banking companies also need to keep an eye on pricing levels, because high banking fees have a direct correlation with low deposit growth, he said.

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