US bank deposits fell by $76.2 billion

Bloomberg – Oz Bank Deposit Last week’s decline in the US indicates that the financial system remains fragile after a series of bank failures.

Deposits fell by US$ 76.2 billion in the week ended April 12, according to seasonally adjusted data from the Federal Reserve (Fed) released on Friday (21). The decline was mainly among large and foreign firms, but also affected smaller banks.

Meanwhile, commercial bank lending increased by $13.8 billion last week. On an unadjusted basis, loans and leases decreased by $9.3 billion.

The data provide a mixed picture. Deposits resumed declines after bouncing the previous week. They fell sharply last month, following failures by Silicon Valley Bank (known as SVB) and others, and are now at their lowest level since July 2021.

But lending increased for the second week in a row, led by consumer and home loans, indicating credit conditions are improving.

The Fed’s report, known as the H.8, provides estimated weekly aggregate balance sheets for all commercial banks in the United States. Economists are closely monitoring credit conditions after several lenders went bankrupt last month.

What Bloomberg Economics Says…

“The flow on deposits at small banks appears to have been increasingly restrained over the past month, but the flow of deposits at large banks has continued on its one-year path. The Federal Reserve’s latest banking data show that the current banking environment is primarily the result of overall monetary tightening, not recent bank failures.

– Stuart Paul, Economist

Borrowing is essential for business growth and spending, and tighter credit standards are seen as a drag on the economy in the coming months. However, a recent survey suggests that this may help reduce inflation faster than previously expected Bloomberg with economists.

Data following this week’s earnings from several regional banks said they expect lower returns from their lending businesses this year. KeyCorp and Fifth Third Bancorp also cut their outlook for net interest income, while Zions Bancorp’s outlook was lower than expected.

Even so, companies like Fifth Third and Truist Financial Corp. At a time when customer withdrawals contributed to the decline of its three rivals, the most watched indicator during the quarter – deposit levels – remained stable.

Central bank officials have suggested that tighter credit conditions will help it do its job, which could reduce the urgency or need for further rate hikes. Still, with inflation so high, policymakers are expected to raise rates by a quarter point at a meeting next month.

The 25 largest U.S. banks account for nearly three-fifths of all lending, although in some key areas — including commercial real estate — smaller banks are more prominent in lending.

Across all banks, total assets fell by $86 billion, led by large banks.

It should be noted that the H.8 report focuses on the universe of commercial banks. This distorts the picture when assets are divested to non-banks, as was the case with assets liquidated following the failure of Signature Bank.

The report is primarily based on data reported weekly by a sample of around 875 domestically accredited banks and foreign companies.

—With the help of Max Reyes

See more at Bloomberg.com

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