Chase shrugs off loss of CD investors

Since JPMorgan Chase took over Washington Mutual's banking operations last fall, billions of dollars in customer deposits have walked out the door. Some customers have issues with Chase's policies or customer service, but many others have been seeking higher returns on their savings.

Chase's response, especially to that last group: Don't let the door hit you on the way out.

As painful or annoying as that might be to savers, especially those who had certificates of deposit or CDs at WaMu, analysts say the bank is smart to rid itself of expensive, low-profit deposits.

In Washington state, deposits in former WaMu branches now owned by Chase dropped by nearly $2.8 billion, or 22.3 percent, between June 30, 2008 and June 30, 2009, according to a Seattle Times analysis of federal deposit data made public last month.

The New York-based bank lost similarly big chunks of its deposit base elsewhere in WaMu's old West Coast turf: 21 percent in Oregon, 23 percent in Idaho, and, in California, 22.5 percent or $17.4 billion — enough to set up a good-sized bank.

Chase's deposit-market share in WaMu's former home state fell from 11.1 percent last Juneto 8.53 percent this year.

WaMu had been the second-biggest bank in Washington by that measure; Chase now is in third place, behind Bank of America and KeyBank.

Some of the deposit runoff seen in the federal data reflects the run on the bank last summer that helped spur regulators to seize the ailing thrift.

As of June 30, 2008, WaMu had $188.3 billion in deposits companywide, enough to make it the nation's sixth-largest depositary institution.

But WaMu lost nearly $20 billion in deposits between July 14 and Sept. 25 — when regulators, worried the company was running out of cash it needed to keep operating safely, took over its banking operations and sold them to Chase.

Former WaMu customers who've left Chase since then give a variety of reasons, including account mix-ups during the switchover, frozen or reduced lines of credit, lower savings rates and a perceived deterioration in customer service.

"I loved WaMu," said Rich Golby, of Des Moines.

"When you went into their branches it was all wide open. The tellers knew your name and would chat with you."

But after Chase took over the Redondo Square branch where Golby banks, "the first thing they did was put up a big huge Plexiglass wall. I hated it."

He also wasn't pleased by Chase's new policy on check holds: "All of a sudden they're holding my payroll check for 24 hours and only letting me have $100 of it."

Golby has moved some of his family's certificates of deposit from Chase as they've matured, and is considering switching his regular checking and savings accounts to Boeing Employees Credit Union.

Darcy Donahoe-Wilmot, a local spokeswoman for Chase, said the bank has made a conscious decision to let some CD customers walk rather than continue paying the higher interest rates that WaMu had.

"The maturing of the above-market CDs has been occurring this fall and some of that (hot) money is going elsewhere as we expected," Donahoe-Wilmot wrote in an e-mail response to questions. "Customers interested in only CDs are not our core customer."

That would be people like Christine Powell, of Seattle, who bought a 13-month CD from WaMu in September 2008 — days before the thrift was seized by regulators and sold to Chase.

Back then, with other funding sources unavailable, WaMu was desperately trying to hang onto its deposits and bring more in: The annual yield on Powell's CD was 5 percent.

When Chase sent Powell her renewal notice last month, she was stunned at the new yield: 0.2 percent if she let it roll over automatically. "It was a big surprise," she said.

Powell's banker told her that if she called to renew, she could get a "CD special" with a 1.25 percent annual yield.

Instead, she moved her money to HomeStreet Bank, which gave her a 3.45 percent annual yield for a five-year CD.

Offering above-market CD rates is an easy way for banks in need of more capital to attract deposits — especially when other funding sources, such as the stock and corporate-debt markets, aren't available.

But such deposits can leave quickly if another bank pays a slightly higher rate, and regulators generally frown on banks relying too much on such "hot money."

Bert Ely, a veteran banking analyst and consultant in suburban Washington, D.C., said it was "entirely predictable" that Chase would let "rate shoppers" go without a fight.

"You're losing your least-profitable deposits," Ely said, noting that CD-only customers are less likely to buy other products from the bank because "they have no particularly loyalty to any one bank — they'll go to wherever the rate is highest, as long as it's insured."

Overall, Chase inherited about $35 billion in high-rate CDs and other time deposits when it acquired WaMu, according to a recent investor presentation by Charlie Scharf, Chase's head of retail banking. As of the end of last quarter, that had fallen to around $10 billion, and Scharf said he expected that decline to continue for another couple of quarters.

Low-rate CDs, on the other hand, have risen from less than $15 billion to about $25 billion, and basic savings and checking deposits at former WaMu branches are up slightly at close to $80 billion — despite lower rates paid on those accounts than WaMu paid.

Mitchell Cuevas, a University of Washington student and former WaMu customer, said earlier this month outside the University District Chase branch that, aside from the logo, the only change he's noticed is "the Web site's better." That's important, Cuevas said, because he does most of his banking and bill paying online.

Another former WaMu customer, who gave his name only as Jeff, echoed Cuevas' assessment: "I don't really see much of a difference, actually."

Jeff, 47, said he'd banked at WaMu for his entire adult life, and was a "kind of nervous" after Chase took it over. "But they're all FDIC (insured), so what are you gonna do? It happens."

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com