Old National Bancorp (ONB): 5 FORCES Analysis [Nov-2025 Updated]

You're looking at Old National Bancorp's competitive position right now, late in 2025, and frankly, it's a tight squeeze. As a former head of analysis, I can tell you the landscape is defined by intense rivalry with peers like Fifth Third and KeyCorp, plus customers holding more cards thanks to digital transparency, pushing deposit costs to 197 basis points in Q3 2025. Still, ONB has some solid moats, especially against brand-new banks, given their strong capital base-that Tier 1 common equity ratio sits at a healthy 11.02% as of Q3 2025-but the pressure from FinTechs and credit unions is real. Let's break down exactly where the pressure points are across all five of Michael Porter's forces so you can see the near-term risks and opportunities clearly.

Old National Bancorp (ONB) - Porter's Five Forces: Bargaining power of suppliers

The bargaining power of Old National Bancorp's suppliers is a critical factor, particularly as the bank navigates post-integration efficiencies and a dynamic interest rate environment. This power manifests across technology vendors, the labor market, and the cost of funding.

Technology providers, while not explicitly named as Fiserv in the latest reports, represent a significant source of supplier leverage. Old National Bancorp has been making targeted investments in new technology and partners with leading technology companies to manage the fast-evolving threat landscape and enhance operational functions for greater efficiencies. The Chief Information Officer discussed the bank's technology-driven transformation in late 2025, underscoring the reliance on these external partners for streamlined and secure services.

Competition for top-tier talent is clearly a factor, as Old National Bancorp is actively reinvesting cost savings from the Bremer partnership with a specific focus on talent acquisition to maintain positive operating leverage. This signals that securing and retaining skilled bankers requires competitive compensation, effectively increasing the cost of this essential labor input.

Depositor power is demonstrably high, directly impacting Old National Bancorp's funding costs. The cost of total deposits reached 197 basis points in the third quarter of 2025. This was an increase from the 193 basis points reported for the spot rate on total deposits at the end of Q2 2025. The bank's period-end total deposits stood at $55.0 billion in Q3 2025, with core deposits growing at an annualized rate of 5.8%.

Here is a look at the trend in Old National Bancorp's deposit costs leading up to late 2025:

Regarding wholesale funding, Old National Bancorp signaled a degree of insulation from immediate rate shocks, stating its balance sheet was neutrally positioned to short-term interest rates as of the Q3 2025 earnings call. However, the reliance on non-core funding remains a point of interest. The loan-to-deposit ratio was 87% at the end of Q3 2025, and brokered deposits accounted for 6% of total deposits.

The supplier power dynamics can be summarized by these key cost and balance sheet metrics:

• Total deposit costs in Q3 2025: 197 basis points.
• Cost of total interest-bearing deposits in Q3 2025: 2.57%.
• Brokered deposits as a percentage of total deposits: 6%.
• Loan-to-deposit ratio at end of Q3 2025: 87%.
• Focus on talent acquisition suggests upward pressure on skilled labor expenses.

Old National Bancorp (ONB) - Porter's Five Forces: Bargaining power of customers

For Old National Bancorp (ONB), the bargaining power of customers is a significant factor, particularly as the banking landscape continues to favor digital transparency and mobility. You see this dynamic playing out differently across your client segments.

Retail clients definitely have more leverage today. The ease of moving basic deposit accounts is amplified by digital tools that increase rate transparency across the market. While Old National Bancorp introduced a new small business digital banking platform in 2024 with modern money movement capabilities, the general industry trend shows that for simple transactions, inertia is the main barrier, not complexity. Industry benchmarks suggest acquiring a new customer costs between $58-$91 on average across sectors in 2025, while retention costs are estimated much lower, around $5-$25. This massive cost differential underscores how much more expensive it is to win back a customer who leaves, which is a direct measure of their power.

Commercial clients, which are a key growth driver for Old National Bancorp, demand a more nuanced approach. They are looking for relationship-based service alongside competitive pricing. The bank's strong commercial focus is evident in the third quarter of 2025, where total commercial loan production hit $2.8 billion, a 20% increase from the second quarter of 2025. However, even here, pricing pressure is real; if the relationship team falters, the client has alternatives, especially given that Old National Bancorp is aiming for 4% to 6% annual loan growth.

The low switching costs for basic deposit products directly elevate customer power. This forces Old National Bancorp into a constant tension: you must balance aggressive loan growth with the critical need for deposit retention. The bank's period-end total deposits stood at $55.0 billion as of the third quarter of 2025, with core deposits growing at an annualized rate of 5.8%. This deposit base is funding the loan book, which totaled $48.0 billion at the end of the third quarter of 2025. The resulting loan to deposit ratio of 87% shows that while liquidity is strong, retaining those core, lower-cost deposits is paramount to funding future asset growth efficiently.

Here is a snapshot of the balance sheet metrics that frame this customer dynamic:

The power exerted by customers is visible through several key operational pressures:

• Retail deposit costs are sensitive to market rates, pushing total deposit costs to 197 bps.
• Commercial clients drive significant production, with Q3 loan production at $2.8 billion.
• The bank must maintain high retention, as deposit retention rates were reported as exceeding 90% in earlier 2025 commentary.
• A 5% improvement in retention can boost profits by 25-95%, highlighting the financial impact of customer power.
• Noninterest-bearing deposits make up 24% of core deposits, representing a highly price-sensitive funding source.

Old National Bancorp (ONB) - Porter's Five Forces: Competitive rivalry

You're looking at the competitive landscape for Old National Bancorp, and honestly, the Midwest banking scene is a tough neighborhood. The intensity of rivalry here is definitely high, driven by established super-regional players. Old National Bancorp is the sixth largest commercial bank headquartered in the Midwest, which gives it a solid base, but it still competes directly with giants in the region.

Old National Bancorp's scale, with approximately $71 billion in total assets as of the quarter ending September 30, 2025, positions it as a major regional force, but it is significantly smaller than some of its direct competitors in the same footprint. For instance, Fifth Third Bancorp reported total assets of $212.903 billion for the same period. KeyCorp's total assets stood at $187.409 billion as of Q3 2025. This size disparity means Old National Bancorp must compete fiercely on service and niche specialization rather than sheer balance sheet dominance.

Here's a quick look at how Old National Bancorp stacks up against these rivals on key operational metrics from Q3 2025:

Pricing wars for core deposits are certainly intense, which directly pressures the Net Interest Margin (NIM). While Old National Bancorp managed to increase its NIM on a fully taxable equivalent basis by 11 basis points to 3.64% in Q3 2025, this came alongside an increase in total deposit costs of 4 basis points linked quarter, reaching 197 bps. This suggests Old National Bancorp had to pay up for deposits to maintain growth, as core deposits grew 5.8% annualized. To be fair, some peers showed success in lowering their cost of funds; Fifth Third Bancorp reported total deposit costs declined to 1.97%, and KeyCorp's total deposit costs also declined by 2 basis points to 1.97%.

The pressure is clear when you look at the cost of funding relative to the competition. Still, Old National Bancorp's internal discipline is evident in its cost structure. The Q3 2025 adjusted efficiency ratio of 48.1% demonstrates disciplined cost management when stacked against rivals. For comparison, Fifth Third Bancorp reported an adjusted efficiency ratio of 54.1% for the same period. This gap suggests Old National Bancorp is running a leaner operation, which is a necessary action to maintain profitability amid aggressive pricing for deposits.

The competitive dynamics manifest in several key areas:

• Core deposit growth annualized at 5.8% for Old National Bancorp.
• Total deposit costs for Old National Bancorp reached 197 bps in Q3 2025.
• Fifth Third Bancorp's capital markets fees grew 28% sequentially.
• KeyCorp's Assets Under Management grew 11% year-over-year to $68 billion.
• Old National Bancorp's adjusted ROATCE was 20.1% in Q3 2025.

Finance: draft 13-week cash view by Friday.

Old National Bancorp (ONB) - Porter's Five Forces: Threat of substitutes

You're looking at how non-bank players are chipping away at Old National Bancorp's traditional revenue streams. The threat of substitutes is significant because these alternatives often offer better digital experiences or more specialized pricing, which directly pressures ONB's fee income and loan growth.

FinTechs offer nimble, digital-only alternatives for payments and retail lending.

FinTechs are definitely changing how people move and manage money. For instance, the U.S. fintech market size is projected to be valued at US$95.2 Bn in 2025. Within that, digital payments control a huge chunk, expected to account for over 35% of the service type share this year. This shift is eating into traditional transaction fee revenue. Honestly, look at how fast cash is disappearing; its usage fell from 31% in 2017 to just 16% in 2023. Plus, with Apple opening its NFC ecosystem to third parties, expect wallet competition to intensify, forcing banks like Old National Bancorp to keep pace or risk losing the point-of-sale relationship.

Credit unions provide a strong, non-taxable substitute for community banking services.

Credit unions remain a potent, tax-advantaged substitute, especially for community-focused services. As of the first quarter of 2025, total assets for federally insured credit unions reached $2.37 trillion, marking a 2.6% year-over-year rise. Their total loans outstanding grew 3.3% over the same period to $1.65 trillion. While their share of total mortgage originations was only 7.0% in the first half of 2025, they are making inroads in commercial lending. For example, credit unions held $168.0 billion in commercial real estate as of March 31, 2025, which was up 11.9% from the prior year. To be fair, commercial services still represent less than 5% of total credit union assets, but industry experts see potential for that to quadruple to 20% or more, directly targeting Old National Bancorp's core commercial client base.

Private credit funds increasingly substitute for traditional commercial bank lending.

The private credit space is growing fast, directly competing for the corporate and commercial loans that are central to Old National Bancorp's Net Interest Income. This sector ballooned to $1.5 trillion in 2024 and is estimated to soar to $3.5 trillion by 2028. This capital is readily available, often offering borrowers speed and flexibility that traditional banks might struggle to match. We see this flow in the unlisted public Business Development Companies (BDCs), where net new money inflows hit more than $10 billion in the third quarter of 2025, pushing total net assets to over $123 billion-a 33% increase since the end of 2024. This shows a clear, massive pool of capital actively seeking to deploy where Old National Bancorp lends.

Non-bank mortgage originators continually challenge ONB's mortgage fee income.

Non-banks dominate the mortgage origination market, which directly impacts Old National Bancorp's noninterest income potential. The nonbank share of total originations increased to 66.4% in Q1 2025, up from 65.2% in all of 2024, and remained high at 65.1% for the first half of 2025. The top five lenders, which included four nonbanks, captured 21.3% of originations in Q1 2025 alone. Fannie Mae forecasts total originations to reach $1.9 trillion in 2025, with an expected 18% increase for the year. This sustained dominance means Old National Bancorp is fighting for a smaller piece of the origination pie.

Here's a quick look at how the scale of these substitute markets compares to Old National Bancorp's Q3 2025 balance sheet metrics:

You need to watch the commercial lending space closely, as that's where the next big fight will be. The fact that credit unions aim to quadruple their commercial services presence from under 5% of assets is a clear signal.

• FinTech payment share in 2025: over 35%.
• Cash usage in US payments: down to 16% in 2023.
• Unlisted BDC assets growth YTD Q3 2025: 33%.
• Credit union commercial real estate growth YoY Q1 2025: 11.9%.
• Total mortgage originations forecast for 2025: $1.9 trillion.

The pressure from these non-bank and alternative capital sources is structural, not cyclical. Finance: review Q4 2025 pipeline conversion rates against non-bank competitors by end of January.

Old National Bancorp (ONB) - Porter's Five Forces: Threat of new entrants

When we look at the threat of new entrants for Old National Bancorp, the barriers to entry in traditional commercial banking remain quite high, which is good news for you as an incumbent. Honestly, setting up a new, full-service bank from scratch-a de novo bank-is a massive undertaking, primarily due to the regulatory gauntlet and the sheer amount of capital required to even get a seat at the table.

The regulatory environment, while showing some signs of being open to new charters, still demands significant financial muscle. For instance, the OCC granted preliminary conditional approval to Erebor Bank in October 2025, but this specialized institution targeting technology companies and ultra-high-net-worth individuals was immediately saddled with enhanced scrutiny for its first three years. One of the key conditions imposed was a minimum 12% Tier 1 leverage ratio requirement during that initial period. This level of required capitalization immediately filters out most smaller, less capitalized players.

Old National Bancorp's own financial strength acts as a significant deterrent. A well-capitalized firm is inherently more resilient to competitive pressures and better positioned to absorb initial market shocks that a new entrant might face. As of the third quarter of 2025, Old National Bancorp maintained a preliminary regulatory Tier 1 common equity to risk-weighted assets ratio of 11.02%. That ratio comfortably exceeds the minimums required to be considered well-capitalized, signaling a robust buffer against new competition.

The physical and intangible scale Old National Bancorp has built through strategic M&A is another major hurdle. Replicating this footprint and the associated customer trust takes years and billions in investment. Following the completion of the Bremer Bank partnership in October 2025, Old National Bancorp became a combined bank with assets valued at approximately $70 billion. This scale is built upon a history of expansion, including the addition of 23 banking centers from the CapStar partnership finalized in April 2024, on top of a pre-merger network of nearly 200 retail branches. It's tough to build that kind of physical presence and market density quickly.

Here's a quick look at how Old National Bancorp's capital position compares to the entry requirements for a new, specialized bank:

The reality on the ground suggests that most disruptive forces are not coming from new banks obtaining charters. Instead, the competitive energy is channeled elsewhere. New entrants are predominantly FinTech firms that opt to collaborate with established institutions rather than navigate the arduous process of chartering their own bank. This partnership model allows them to deploy technology and reach customers without taking on the full regulatory and capital burden that Old National Bancorp already manages.

The primary challenges from potential new competitors look like this:

• Regulatory approval process remains lengthy and capital-intensive.
• New charters face enhanced scrutiny for the first three years.
• FinTechs prefer partnership over de novo chartering.
• Old National Bancorp's asset base is now near $70 billion.
• The bank's Q3 2025 CET1 ratio was 11.02%.

So, while the regulatory agencies are signaling an openness to innovation, the structural barriers-capital, compliance infrastructure, and established scale-keep the threat of a direct, fully-chartered competitor low for Old National Bancorp right now. Finance: draft a sensitivity analysis on the impact of a 100 basis point drop in the CET1 ratio on regulatory capital buffers by next Tuesday.