By Allyn Hughes, CFP®, ChFC®, CLU®, CAP®
Recently I read the transcript of a presentation by John Shrewsberry, the CFO of Wells Fargo. He commented that Wells Fargo had $1,200,000,000,000.00 of deposits (yes, $1.2 trillion!) on which they were paying – on average – 2 basis points (2/100th of 1%) in annual interest.
That means that annually, Wells Fargo is paying its depositors somewhere around $240 million annually in interest. At first glance that seems like a healthy sum.
According to Wikipedia, in 2014 Wells Fargo was the second largest bank in the U.S. by deposits with approximately 10.26% of all bank deposits.
If you assume that the U.S. has 310 million people, then the average U.S. citizen has deposits of $3,870 at Wells Fargo ($1,200,000,000,000/310,000,000). If you also assume that about one-tenth of Americans are Wells Fargo customers then that average deposit climbs to $38,700.
So the average depositor with Wells Fargo might have around $38,700 in savings/CDs with them. This amount of money is below the maximum for FDIC insurance, so it is guaranteed by the U.S. Government.
Multiplying this $38,700 amount by the same .02% above and you learn that on average, Wells Fargo is paying about $7.74 per year in interest on this amount. So if you deposit enough to buy a pretty nice car with the bank, over a year Wells Fargo will pay you enough interest to buy somewhere around three gallons of gas.
No wonder many older Americans are hoping that the global economy will improve so global interest rates will begin to increase again. The earnings on their bank savings balances have nowhere to go but up.