Non-interest-bearing demand deposit accounts (or DDAs) form 31% of total deposits for SunTrust Bank (STI). Money market accounts, which contribute 35% to the bank’s total deposits, typically pay a higher interest rate than savings accounts and require higher minimum balances.
Negotiable order of withdrawal (or NOW) accounts contribute 22% to SunTrust’s total deposits. NOW deposits are similar to interest-bearing demand deposits.
Savings deposits account for 4% of STI’s total deposits. Higher-cost time deposits make up just 8% of the bank’s total deposits.
Growth in deposits
The chart above shows STI’s deposit growth by type. Total client deposits increased by 7% at the end of 4Q14 compared to the same quarter last year. However, the growth was not uniform across all categories.
Lower-cost deposits—including DDA, NOW, money market, and savings—grew 10%. Higher-cost time deposits, on the other hand, declined 17%. As a result, rates paid on deposits declined from 0.25% to 0.21%.
Growth lower than industry average
SunTrust’s deposits have had a compound annual growth rate (or CAGR) of 3.4% over the last four years. The CAGR of deposits was 10% for JPMorgan Chase (JPM), 8% for US Bancorp (USB) and Wells Fargo (WFC), 6% for PNC Financial (PNC), 4.9% for BB&T (BBT), 3% for Bank of America (BAC), and 2% for Citigroup (C) during the same period.
STI’s deposit growth is clearly lagging behind the industry average. Other banks are experiencing strong growth in deposits, especially non-interest-bearing ones. Currently, the general industry trend is to have disproportionately higher deposit growth compared to loan growth.
This trend is resulting in a declining loan-to-deposit ratio in the industry. You can learn more about this by reading Why Is the Loan-to-Deposit Ratio Declining for US Banks?
In the next article, we’ll discuss SunTrust’s loan-to-deposit ratio.