On Wednesday, Bloomberg reported that following the banking crisis involving several regional lenders in the US, customers rushed to withdraw their savings at US banks. As they did, the largest US banks saw more than a half trillion dollars in deposit outflows compared to one year prior.
The report comes as observers eagerly await quarterly earnings reports, hoping the deposit data within them will shed light on the health of the US banking sector. Earnings season will begin on Friday, with JPMorgan, Citi, and Wells Fargo tipped to issue the first reports.
According to Bloomberg’s report, analysts are estimating that JPMorgan, Wells Fargo, and Bank of America saw $521 billion in deposits withdrawn over the past year, as depositors grabbed their money and headed for the doors. The outlet noted that $61 billion in deposits exited the banks heading for products offering higher interest rates in the first quarter alone, even in spite of a late inflow of cash following the peak of the crisis.
In early March, regional lenders Silicon Valley Bank and Signature Bank both collapsed in days of each other due to massive deposit runs as customers feared for their savings. A third lender, First Republic Bank, nearly collapsed, but was rescued by a $30 billion influx of liquidity from the biggest Wall Street banks, in the form of deposits. The big banks intervened out of fears that had First Republic fallen, it could have triggered a massive crisis of confidence which would have spread, triggering deposit runs and leading to a domino effect of bank failures.
From there the crisis spread to Switzerland, where banking titan Credit Suisse neared collapse, only to be saved by a government-brokered acquisition by rival lender UBS, in return for a mixture of government support and guarantees.
Bank deposits in the United States have been shrinking since last year, as higher inflation has eaten away at savings, and led investors to seek products offering more yield than is offered by mere savings accounts.
Wedbush Securities analysts David Chiaverini and Brian Violino wrote in a note to clients, “It had already been a fiercely competitive environment for deposit gathering, and the recent bank failures may turn the deposit knife fight into a metaphorical gun fight.”
Banking stocks have been falling amid the turmoil in the sector. One benchmark index tracking the leaders of the sector, the KBW Bank Index, fell by 25% over the course of just the month of March. Regional banks were leading the way down, with First Republic seeing its shares fall by 89%.
