Quarterly headlines tell part of what’s happening in banking today: “Wells Fargo Bank reports continued strong growth in core deposits and checking accounts in 2006” (10% deposit growth); “Deposits were up 9% from a year ago” (Webster Bank); “Frost National Bank records asset and deposit growth” (18% deposit growth); and “Citizens Bank reports strong organic deposit growth (9%) and record earnings.”

This sampling of comments on performance is the counterpoint to a continuing struggle for deposits that many bankers are reporting. It has been estimated that nearly 90% of the typical retail bank’s consumer and small-business profits come from spreads and associated fees on core deposits. This puts added pressures on banks that cannot increase their market share. Further, some banks are realizing outright deposit “land grabs” by acquiring small business deposits in their own and neighboring states through offers of remote deposit capture. The battle is heating up in technology and ease of processing.

It raises the question of what the real obstacles are to organic growth and what can be done to make the sales and marketing process attract more customers and their deposits. We’ve seen a few of these obstacles in our routine visits. First, there is too much emphasis placed on new business instead of net new business. The implication here is that customer retention needs to be calculated into the incentive equation, not simply new deposits and accounts. To realize growth, in other words, there needs to be a focus on the existing customer.

The second issue is the process- and technology-related barriers that some banks still have to deal with. Systems integration is essential at the point of sale as is service to link existing customer data to the new business process. We see between 60% and 76% of new business typically coming from existing customers. Let’s not treat them as new customers, subjecting them to a laborious process that includes making them repeat their core information and then getting signature cards as if we didn’t already have them on file.

The third issue is time. When relationship managers are spending less than 50% of their time on new business due to other administrative activities, it is a symptom of lack of integration and/or excessive problem resolution. If your retail and small business growth does not match your competitors’ numbers or your own expectations, please ask your CSRs to estimate how much time they can spend on new business. You may be surprised to learn that you need to improve process and technology to be competitive in this escalating war for deposits.