In the last few years several internet banks have changed their names after their old names were associated with problematic or failed businesses. From a marketing perspective, I'm sure these name changes have been helpful. However, it might anger new customers if they find out the true identity of their bank after they open accounts. They might feel the association with the problematic or failed business would imply financial health problems of the bank. Also, they might not want to support a bank that was part of an institution that received a government bailout.
It should be noted that banks can be financially healthy even if the parent company had financial problems. So the old name can be a little unfair in judging the bank. Nevertheless, it's interesting to know the history of your bank or a bank that you are considering. Below are four internet banks that have recently changed their names:
- Aurora Bank used to be Lehman Brothers Bank. In April 2009 the bank officially changed its name to Aurora Bank. Lehman Brothers was the fourth largest investment bank before it filed for bankruptcy on September 15, 2008. This helped spark the 2008 global financial crisis. As I reported in December 2008 Lehman Brothers Bank, a subsidiary of Lehman Brothers, was not included in the bankruptcy, and it was operating without changes. I'm sure from a marketing perspective, they realized they had to change their name to avoid confusion.
- Ally Bank used to be GMAC Bank. Most regular readers probably remember this change which officially occurred in May 2009. The parent company has also changed its name to Ally. GMAC's financial troubles and the major assistance it received from the US government were definitely marketing issues.
- OneWest Bank used to be IndyMac Bank. Unlike the last two banks, IndyMac Bank failed and was taken over by the FDIC. That failure occurred just over 3 years ago. It was the first major bank closure of the financial crisis. The FDIC managed IndyMac until March 2009 when it was sold to a newly formed bank called OneWest Bank, FSB.
- Alostar Bank used to be Nexity Bank. Like IndyMac Bank, Nexity Bank failed. This happened recently in April, and at the time of the failure, the FDIC arranged for the newly-chartered bank, AloStar Bank of Commerce, to assume all of Nexity's deposits.
One interesting thing to note is that all four of the above banks have competitive internet CD rates. If you're interested in the current health of these banks, click on the bank's name. That will take you to our hub page for that bank. Click on the health tab, and you can view their financial stats. None of these banks have weak financials. We don't have stats for Alostar Bank since it's so new.
How important to you is the financial history of a bank? Is it more important to you than high deposit rates and useful account features?