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Strength in numbers: Capital One has a healthy deposit base

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Deposits grew consistently at Capital One

Most of you know that accepting deposits is one of a bank’s key activities. It helps the bank fund loans. Over the years, Capital One’s (COF) deposit base increased at a steady rate. At the end of 2014, Capital One’s total deposits stood at $246.34 billion. It was an increase of 9.41%—compared to 2013. The bank increased its deposit base consistently over the years.

In terms of the deposit base, PNC Bank is one of the better banks in the Financial Select Sector SPDR (XLF).

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Four main types of deposits

There is one very important fact that many of you may not know. There are many types of deposits. Not all deposits are equally beneficial for a bank.

Primarily, deposits can be divided into four types:

  • time deposits
  • money market deposits
  • checking and savings account deposits
  • non-interest bearing deposits

Out of these four types, non-interest bearing, checking and savings account deposits, and money market deposits are considered to be low-cost deposits. So, growth in these three types of deposits is considered to be better.

High-cost deposits dominate at Capital One

Capital One has a higher proportion of time deposits. Time deposits make up 16.36% of Capital One’s total deposits. In contrast, non-interest bearing deposits only account for 8.68% of Capital One’s total deposits. Non-interest bearing deposits are lower than the sector average. Banks like Wells Fargo (WFC), PNC Bank (PNC), and U.S. Bank (USB) have a higher proportion of non-interest bearing deposits.

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