Wells Fargo (WFC) is the only U.S. lender among the four largest to gain deposits in some Northern Plains states as customers flood banks with cash from an energy boom.
North Dakota, Iowa, Montana, South Dakota and Nebraska were among the 10 states that saw federally insured deposits grow the fastest in the five years through 2012, according to research by Sanford C. Bernstein & Co. Deposits at Wells Fargo branches across those states increased more than at other lenders while competitors such as JPMorgan Chase (JPM) and Bank of America (BAC) didn't compete or lagged behind.
Booming oil production and the fledgling fracking economy have propelled economic growth and attracted investors, developers and job hunters to the U.S. Northern Plains. As the region's economy expands, lenders that built a presence there may continue to see a pick-up in deposits, Bernstein said.
"Banks located in states that are seeing fast growth are in a good position to benefit," said Kevin St. Pierre, a Bernstein analyst and the report's lead author. "With the economy moving further from the crisis, a bank's ability to gather deposits will matter more and more for its earnings and its stock price."
Deposits over the past five years for all banks backed by the Federal Deposit Insurance Corp. grew 9% in North Dakota, 4.4% in Iowa, 4.6% in Montana, 5% in South Dakota and 4.8% in Nebraska, according to data compiled by Bernstein. Wells Fargo's deposits rose 9.3% in North Dakota, 5.9% in Montana, 5.2% in Iowa, 5.7% in South Dakota and 6% in Nebraska, the data show.
Wells Fargo, led by Chief Executive Officer John Stumpf, 59, had the most deposits in all five states among the banks analyzed, according to Bernstein's data. The San Francisco-based lender held 10% of deposits in North Dakota, 12% in Montana, 8.3% in Iowa, 7.3% in Nebraska and 15% in South Dakota, the data show.
The Bernstein analysts excluded branches with more than $500 million in deposits to prevent the data from being skewed by banks that place large corporate deposits in certain locations, St. Pierre said in an e-mail.
U.S. oil production grew last year at the fastest pace in at least six decades as horizontal drilling and hydraulic fracturing, or fracking, unlocked crude trapped in formations such as North Dakota's Bakken shale formation. The boom helped drive unemployment rates in North Dakota, South Dakota, Nebraska, Iowa and Montana to levels lower than the national average of 7.9% in January, according to the Labor Department.
The oil-fueled boom has put North Dakota at the top of the Bloomberg economic health-data index for its increasing employment rates, personal income and tax revenue.
As the labor force expanded, cash poured into the Northern Plains. Total deposits at branches with less than $500 million in the five states grew to $158.5 billion in 2012 from $138.2 billion in 2009 and $123.5 billion in 2007, according to data provided by Bernstein. Total deposits in those states comprised 3.3% of all U.S. deposits last year.
The fracking economy has also given community lenders a lift. Bank deposits in the Bakken region, which stretches from central North Dakota to the northeastern corner of Montana, soared 15% last year, to $3.9 billion, after rising 27% in 2011, according to preliminary data from the Federal Reserve Bank of Minneapolis.
Wells Fargo faces little competition from rivals such as JPMorgan, the biggest U.S. bank by assets, which had no deposits across the five states during the five-year period, according to the data. Iowa deposits at Bank of America, the second-biggest lender, rose by 1.7% to $311 million at the end of 2012, compared with the 4.4% average increase for banks in the state. Bank of America doesn't compete for deposits in the other four states, Bernstein's data show.
"Wells Fargo has been serving customers and small businesses in these states and communities for decades," Richele Messick, a spokeswoman for the lender, said in an e- mailed statement. "Our success is fundamentally tied to the success of our customers, and the confidence that their money is safe and secure."
Spokeswomen for New York-based JPMorgan and Bank of America, based in Charlotte, North Carolina, declined to comment.
Citigroup (C), the third-biggest U.S. bank, had $351 million of deposits in South Dakota and none in the other four states, the data show. The New York-based lender, which is shutting branches and firing staff, is focused on "the top 14 urban markets" in the U.S., said Catherine Pulley, a spokeswoman.
U.S. Bancorp, the seventh-biggest by assets, held 7% of deposits in North Dakota and Montana, with $1.39 billion and $1.2 billion, respectively, according to the data.
"We've seen growth in every category, in lending and deposits," Barry Martin, president of U.S. Bancorp's community banking division, said in a phone interview. "The energy boom has obviously been one of the larger factors, but also, the strong agriculture economy has been a major factor."
Regions Financial Corp., based in Birmingham, Alabama, saw its Iowa deposits drop by 7% over the past five years. Evelyn Mitchell, a Regions spokeswoman, declined to comment.
While deposits rose at Wells Fargo, the lender had fewer Northern Plains branches last year than in 2007 as the total fell 4.2% in North Dakota, 0.9% in Montana, 1.7% in Iowa, 2.1% in Nebraska and 2.4% in South Dakota, according to Bernstein.