The biggest banks grew personal deposits by 21% in the three months to Oct. 31 from a year earlier to a record C$1.7 trillion ($1.3 trillion), driven by government stimulus and business closures that have crimped spending.

Smaller lenders, however, struggled to record growth figures in the single digits, despite offering higher interest rates, as savers stuck with familiarity and size in an uncertain economic climate, analysts said.

"If you have to pay more for deposits in a weak lending environment, it makes it tough," said Avenue Investment Management Portfolio Manager Bryden Teich.

The personal deposit increase at the biggest banks - Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada - followed increases of 17% and 15% over the previous two quarters, growth rates not seen since 2009.

Meanwhile, among smaller rivals, Laurentian Bank of Canada posted a ninth straight quarter of year-on-year personal deposit declines, while Canadian Western Bank's 2.4% growth rate was about half the pace seen a year earlier.

Home Capital Group and Equitable Group have fared better, but their single-digit quarterly growth this year still lags major banks.

The flood of deposits has pressured big banks' margins amid record-low interest rates and sluggish loan growth. But it has also helped them invest in technology and relationship building to prepare for a revival in loan demand, said Goodreid Investment Counsel Portfolio Manager Brian Madden.

"The bigger banks already have most of the primary relationship accounts," he said. "The advantages are going to keep accruing in their favour."

Customers have maintained their big bank relationships despite higher interest rates at alternative lenders.

Home Capital subsidiary Oaken Financial's five-year guaranteed investment certificate (GIC) rate is 1.8%. Equitable's EQ Bank (EQ) offers 1.50% on its highest-returning three-month GICs.

The biggest banks' five-year GIC rates are less than 1%. Short-term bonds yield less than 0.5% versus more than 1% in March.

However, less than 4% of consumers switched their main bank account over the past 12 months, from 6.7% two years ago, Accenture data shows.

Many big bank clients favour familiarity when times are tough, while bigger banks are also seen as safer, even though all deposits are federally insured, said Brandan Brot, principal at deposit broker GIC Wealth Management.

Mahima Poddar, head of personal banking at EQ, said the bank's monthly account opening average in the quarter ended September was triple that of a year ago.

At CWB, branch-raised deposits - rather than through deposit brokers - rose 20% in 2020, a spokesman noted.

Home Capital and Laurentian did not respond to requests for comment.

"The market favours big scale, and it's difficult to grow if you don't have the scale," said Teich, adding that some small banks "are dead in the water."

($1 = 1.2737 Canadian dollars)

(Reporting By Nichola Saminather; editing by Richard Pullin)

By Nichola Saminather