WSJ: Banks Losing Deposits
The Wall Street Journal writes "The Biggest Banks Are Gobbling Up Deposits. Here's Who's Not." The article explains, "Last year, businesses started pulling money from their bank accounts at Fifth Third Bancorp. In response, the Cincinnati lender started offering higher interest rates to some consumers. But the bank still ended 2017 with slightly fewer deposits, the first drop in seven years. Welcome to the new world of Main Street banking, where deposits are starting to head out the door after years of growth. This month, major regional banks reported the increasing competition for deposits in their first-quarter earnings. Some lenders, including Dallas's Comerica Inc. and Regions Financial Corp. of Birmingham, Ala., lost deposits compared with a year ago. Others are still adding deposits, but at a much slower pace than recent years." The Journal explains, "The drain represents another consequence of the Federal Reserve's decision to raise short-term rates, which influences the mortgage market, stocks and other corners of the economy. The higher rates now available in money-market funds and other investments are luring clients to move their money out of bank accounts that still offer minimal interest rates.... In 2017, 10 of 22 major regional banks experienced declining U.S. deposits, compared with only two the year before, according to a Wall Street Journal analysis of Federal Deposit Insurance Corp. data.... The deposit declines aren’t big enough yet to hurt bank earnings, which have broadly been strong thanks to the recent corporate tax cut in the U.S." Finally, the WSJ adds, "But the declines could mark the start of an important industry shift where deposits become less plentiful and Main Street banks do more to compete for them. Regional banks lack the national footprint of JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co., which attract consumers through their ubiquitous branch networks and flashy mobile-banking apps.... Deposits from corporate accounts have often been the cause of the broader deposit declines at regional banks. Business customers tend to be more demanding about rates, since even a small change in rates on large corporate deposits can translate into millions of dollars."
