The Liability Structure

This Chapter examines profitability of trust companies and commercial banks. As in the case of the major asset items, the trust companies showed a deep penetration of the liabilities market in the 1875-1900 period. The deposit data for the trust companies, as reported by the Superintendent of Banking, distinguished between demand deposits and trust deposits. The capital-to-liability ratios of savings banks were much lower than those of the commercial banks or trust companies, although the gap narrowed considerably between 1874 and 1900. Over the 20 years of taxation, from 1881-1900, the favored position of the trust companies would have been an important incremental factor in the growth rate of capital. The superior growth rate in trust company capital was also aided by a relatively higher profitability, measured in terms of rates of return on total capital. Another element contributing to a faster growth rate in trust company capital was a higher retention of earnings.