We model a duopoly comprising an investor-owned (“stock”) bank and customer-owned (“mutual”) bank using the Hotelling framework. A household’s optimal deposit choice is extended to allow it to have preferences over both price (i.e. deposit and loan rates) and nonprice bank characteristics (i.e. non-rate bank attributes). Stock and mutual banks are assumed to maximise profits and total surplus (i.e. profits plus depositor and borrowers surpluses) respectively. We show that while the mutual bank formally maximises customer welfare, it can offer a lower deposit rate and higher lending rate than the stock bank, provided it has sufficient mass-market appeal in terms of nonrate attributes. Despite this, depositor surplus is never higher for the stock bank. This provides an explanation for apparently unattractive mutual bank performance, relative to stock banks, that does not rely on assuming inferior governance (i.e. greater incentive problems) in mutual banks.