Friday, July 28, 2023

So remember that banking crisis that happened in the first quarter of this year? 

No? Well, that’s fine; apparently nobody else does either. The supposed flood of customer deposits from mid-sized banks to large banks looks like it could be over. 

At least, that seems to be the early message from the largest banks themselves, who reported a slight decline in cash deposits from first to second quarter of this year. We pulled the numbers for Bank of America ($BAC), Citigroup ($C), JPMorgan Chase ($JMP), and Wells Fargo ($WFC). Collectively, the amount of cash deposits they held at the end of Q2 2023 fell a barely perceptible 0.57 percent — but fall it did, from $6.98 trillion to $6.94 trillion.

Table 1, below, tells the tale. Indeed, we were somewhat surprised to see that total deposits for the big four have actually fallen for four consecutive quarters. They went from $7.05 trillion last fall to $6.94 trillion today, a drop of 1.57 percent. 

We’re not sure why this is. Perhaps inflation’s sting made people withdraw money from their savings accounts; perhaps higher interest rates made sophisticated investors shift their cash from savings accounts to better-paying money market accounts or treasury bonds. 

We don’t yet have sufficient Q2 reports from mid-sized banks to see whether their deposits are increasing, which would indicate that customers have quit panicking about the stability of their banks. Stay tuned for that analysis in coming weeks as those quarterly reports arrive. 

It’s also important to stress that the Q2 2023 numbers above come from the banks’ earnings releases. Those documents are certainly informative, but they don’t have nearly as much data as a full 10-Q quarterly report. The 10-Q will also have details about held-to-market securities, under-performing loans, and various other clues to the banking system’s overall health. 

In other words, there is lots more financial analysis to be done on the banking sector in weeks to come. Calcbench will have everything you need along the way.

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