Yahoo: Wealthy Depositors Worrisome
Yahoo Finance writes on "Why wealthy customers are the 'most worrisome' for banks right now." Subtitled, "Investors continue to flock to money market funds in search of higher yields, posing an ongoing challenge to banks trying to keep deep-pocketed account holders," the piece states, "Money-market fund assets reached a new all-time high this week as interest rates above 5% continue to attract investors at a time when the Federal Reserve appears determined to keep rates elevated for some time. About $14 billion poured into money-market funds in the week through August 30, according to data from the Investment Company Institute. Total assets reached $5.58 trillion, versus $5.56 trillion the previous week.... This is not great news for banks that have been struggling to hold onto their depositors for the last year, especially since the failures of three sizable lenders in the spring. Since the beginning of January deposits at all US banks have fallen by $371 billion, according to data from the Federal Reserve, while money market funds have risen by more than $769 billion. Those outflows slowed during the summer, but deposits are still down for bigger banks since the end of June." It continues, "The greatest flight risk is still from the wealthy. Deposits from wealth management and corporate accounts have both fallen nearly 13% so far this year through July, according to data provider Curinos, although both stabilized during the month of July. August data is not yet available. Mass-market consumer accounts, by comparison, have fallen just 1.8%. 'Ironically, the most worrisome bank client is the very liquid high net worth client,' Tim Coffey, a bank analyst with Janney Montgomery Scott, told Yahoo Finance. 'The least concerning are the lower balance, lower income households.'" The Yahoo article says, "Many depositors have 'shifted their funds into higher-interest-bearing accounts, increasing banks' funding costs,' S&P said last month. 'The decline in deposits has squeezed liquidity for many banks while the value of their securities -- which make up a large part of their liquidity -- has fallen.' Deposits at FDIC-insured banks fell 2.5% in the first quarter of the year, the steepest quarterly drop since the regulator began collecting the data in 1984. The drop for uninsured deposits was much deeper; they fell 8.2% for the same period. 'If you're a bank and you're not offering a competitive rate, there's some flight risk,' Scott Sieffers, a bank analyst for Piper Sandler, told Yahoo Finance."
