Bloomberg: 0.01% Yields a Dilemma
Bloomberg published the brief, "Americans Sick of 0.01% Yields Create New Dilemma on Wall Street." It explains, "Across JPMorgan Chase & Co.'s broad suite of consumer accounts, one number is just about everywhere: 0.01%. That's the interest rate on Chase Sapphire, Chase Premier Plus and Chase Private Client checking accounts, regardless if someone deposits $5 or $500,000. The same is true for Chase savings accounts, according to a fact sheet as of April 12. Those afforded 'relationship rates' get a whopping ... 0.02%. On that same day, JPMorgan reported that its net interest income -- the difference between what it earned on loans versus what it paid on deposits -- fell in the first quarter from the last three months of 2023, the first sequential drop in 11 periods. Shares tumbled by the most since June 2020." The article continues, "The largest US bank was hardly alone: Wells Fargo & Co. also reported NII that missed analysts' estimates. Both banks cited increased pressure to pay out more for deposits, which offset the benefit of higher interest rates earned on loans. It all points to a trend that has been bubbling beneath the surface since the Federal Reserve began raising interest rates, but has only more recently been reaching Wall Street's bottom line: Americans are getting wise with their cash. Perhaps nowhere is this more stark than in certificates of deposit.... US commercial banks held $2.26 trillion of large CDs (defined as $100,000 or more) on their books as of the end of 2023, Fed data show. That was up $615 billion from a year earlier, the sharpest annual increase on record." It adds, "Wells Fargo said last week that its non-interest-paying deposits slumped 18% from a year earlier, while those that do pay interest climbed.... At JPMorgan, CFO Jeremy Barnum said migration of deposits from checking and savings to CDs is the 'dominant trend'.... Another option for Americans is to eschew banks altogether. Some money market funds, which don't have the same lockup provisions as CDs, are offering yields of about 5%. The amount of cash in these vehicles soared by more than $1 trillion in 2023, the biggest jump ever, according to Investment Company Institute data."
