Too Big to Fail? So What, Say Bank Depositors

ALICIA STARKO
WALL STREET JOURNAL BLOG – MKTG

May 9, 2016

Too Big to Fail? So What, Say Bank Depositors

        

The Wall Street Journal reports the biggest U.S. banks continued to gain deposits in the first quarter. The big four commercial banks— J.P. Morgan Chase, JPM 0.58 % Bank of America, BAC 1.41 % Wells Fargo WFC 1.14 % and Citigroup C 0.79 % —held $4.2 trillion in deposits at the end of the first quarter. That was up 2.1% from the previous quarter, outpacing the overall growth of deposits at U.S. banks, according to Federal Reserve data. People say they don’t like too-big-to-fail banks yet plenty of people are still happy to give those same banks their money—even when it earns them next to nothing. Good news for Banks - In the first quarter, total loans at BofA, Citi and Well Fargo were up 5.8%. So the banks are able to put more of the deposit money to work. At J.P. Morgan, where total loans rose 11% from a year earlier, the bank’s loan-to-deposit ratio of 64% in the first quarter was up sharply from 56% a year earlier.

In the first quarter, BofA paid an average yield of just 0.08 percentage points on U.S. interest-bearing deposits of about $707 billion. Meanwhile, its loans and leases of about $893 billion earned an average yield of 3.74%. That was better than the 2.45% its nearly $400 billion in securities earned. It seems the Bank may just get bigger and richer.