The outlook for the industry will be dim, as revenue continues to drop and more banks exit
Los Angeles, CA (PRWEB) July 27, 2012
The Industrial Banks industry stands in danger of getting regulated out of business. A 2007 moratorium on new industrial bank applications put in place by the Federal Deposit Insurance Corporation (FDIC) and extended through 2013 by the Dodd-Frank Act has prevented new firms from entering the industry. “Although the industry performed stronger than the overall banking sector through the recession,” says IBISWorld industry analyst Doug Kelly, “contracting consumer spending and financial distress at parent financial firms drove a number of firms to exit the industry.” As a result, the industry lost many of its largest players that transformed into commercial banks (IBISWorld report 52211) to take advantage of government assistance programs such as the Troubled Asset Relief Program (TARP).
IBISWorld estimates the Industrial Banks industry has a medium level of concentration, with the top four industrial banks - American Centurion Bank, USAA Savings Bank, GE Capital Financial Inc. and BMW Bank of North America - accounting for a healthy majority of industry revenue. Over the past five years, industry concentration has increased due to the exits of several notable industry players such as the Goldman Sachs, Morgan Stanley and Merrill Lynch industrial banks. According to Kelly, “Improvements in consumer spending and loan demand also helped the industry major players increase revenue organically.” The rest of the industry is characterized by a number of small industrial banks that target niche markets with much smaller assets. As a result of industry exits, IBISWorld estimates that the number of industrial banks declined over the past five years. IBISWorld estimates that industry exits, declines in loan demand and contracting consumer spending caused revenue for the Industrial Banks industry to decline at a 6.1% average annual rate over the past five years, including a decline of 0.3% in 2012, to about $13.8 billion.
The outlook for the industry looks much brighter. IBISWorld anticipates the FDIC will lift the ban on industrial banks in 2013 after favorable reports on industry conditions, allowing the number of industry enterprises and revenue to grow from 2014 onward. IBISWorld estimates that an increase in the number of industrial banks along with improving consumer spending and loan demand will cause industry revenue to rise. Firms in this industry, particularly commercially owned industrial banks, will serve as drivers of innovation in the banking sector and as a source of untapped growth capital in the US economy over the next five years. For these reasons, industry research firm IBISWorld has added a report on the Industrial Banks in the US industry to its growing industry report collection.
For more information, visit IBISWorld’s Industrial Banks in the US industry report page.
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IBISWorld industry Report Key Topics
Industrial banks, also known as industrial loan companies, are financial institutions authorized to make consumer and commercial loans and to accept federally insured deposits. These types of banks can be owned by either financial or commercial firms. Industrial banks are not regulated by the Federal Reserve under the Bank Holding Act, instead they are regulated by the state under which they are charted and by the FDIC.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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