With the fight for deposit dollars growing ever tougher, U.S. Bancorp is turning inward.
In an internal letter sent last week, chairman and chief executive John F. Grundhofer urged each of the roughly 26,500 employees of the $77 billion-asset Minneapolis banking company to help boost flagging deposit growth.
"We encourage you to help us meet a critical growth objective by increasing your deposits with us," Mr. Grundhofer wrote. "We all can be better ambassadors for U.S. Bancorp if we take advantage of the many financial solutions available to meet our own financial needs."
Hitting up employees for this kind of help is not unheard of. In fact, Jack Grundhofer's brother, Jerry, who runs Firstar Corp. in Milwaukee, has exhorted his troops to boost deposits in any way they can.
The practice may become increasingly prevalent in an industry hurting for the low-cost funding provided by deposits. Because of the economic boom's unusual length, people are far more confident about investing in the equity markets. That in turn has choked off cash that might have gone into deposit accounts and forced banks to rely on higher-priced funding sources, putting the squeeze on margins, said Ben Crabtree, an analyst at George K. Baum & Co.
"This is going to become an industry theme; more and more banks will have to try to boost deposits by any means possible," Mr. Crabtree said.
He pointed to Marshall & Ilsley Corp. of Milwaukee, which said Wednesday that fourth-quarter non-interest-bearing deposits grew a mere 2.4%, compared with the year earlier. Mr. Crabtree said he had expected growth more in the 4% to 5% range.
"Based on what I've seen so far, the fourth quarter's loan growth was good but deposit growth stunk," he said.
Though the issue has been on bankers' minds for some time, it rose to prominence when U.S. Bancorp pointed to its own problems Dec. 6. It announced that demand deposits were failing to rise by the $600 million expected for the fourth quarter. This problem would contribute to an earnings shortfall for the period, the company said.
To stimulate employees to help out by using U.S. Bancorp products and services, Mr. Grundhofer said the company would expand the kinds of discounts available to its workers. U.S. Bancorp already offers them free automated teller machine access, free checking, and discounted telephone bill payment and mortgage and home equity loans.
When U.S. Bancorp announced its funding problem last month, it warned that fourth-quarter earnings would be 52 to 54 cents a share - as much as 7 cents below analysts' consensus at the time. Deposit growth was by no means the only drain on earnings prospects. The company also mentioned increased investment in technology and sluggish consumer loan growth.
U.S. Bancorp is to report its fourth-quarter earnings Tuesday. Its stock price, which was about $35 a share before the disclosure, has languished since then, hovering in the low 20's in recent weeks.
"It is important to maintain perspective on our current challenges and look toward the future," Mr. Grundhofer. "U.S. Bancorp stands on solid footing because we have many, many talented people in place throughout the corporation."
