USA: Bloomberg reported on Wednesday that the largest US banks have likely seen a deposit outflow of over half a trillion dollars from a year earlier as customers rushed to withdraw their savings in the wake of a banking crisis at several regional lenders.
In anticipation of the deposit data that will be released when major US banks report first-quarter earnings, worries about the state of the banking industry are growing. Friday is expected to mark the beginning of the earnings season for JPMorgan, Citi, and Wells Fargo.
In the most severe downturn in a decade, according to banking analysts, JPMorgan, Wells Fargo, and Bank of America lost $521 billion in deposits over the past year.
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According to the outlet, the decline in the first quarter alone reached $61 billion as a late infusion of cash following a crisis at three US lenders failed to counteract the outflow of money to products with higher interest rates.
Massive deposit runs at the beginning of March led to the quick failure of Silicon Valley Bank and Signature Bank as lenders. Top Wall Street banks ultimately decided to lend $30 billion in deposits to save a third lender, First Republic. Investors' concerns that First Republic might fail as the next US bank prompted the big lenders to intervene.
Since the beginning of last year, bank deposits have been declining due to high inflation, which depletes savings and encourages depositors to look for higher yields than what is provided by deposits.
"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," wrote analysts David Chiaverini and Brian Violino of Wedbush Securities in a note.
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Additionally, the recent upheaval has caused banking stocks to plummet. The leading lenders' benchmark index, the KBW Bank Index, lost 25% in just March. The shares of First Republic Bank fell by 89% last month, making regional banks the biggest losers.