Large US banks shrink assets; industry cuts wholesale funding in Q4 2024

In the fourth quarter of 2024, the US banking industry reported a smaller overall asset base and upgraded its funding profile.

Total assets on an aggregate basis for US commercial banks, savings banks, and savings and loan associations, excluding nondepository trusts and companies with a foreign banking organization charter, were $24.098 trillion as of Dec. 31, 2024. This aggregate is the second-highest quarter-end level since the Federal Reserve was established, although it is down $112.43 billion, or 0.5%, from the end of the third quarter, according to S&P Global Market Intelligence data. Aggregate assets have fallen in seven of the last 11 quarters.

The majority of institutions with greater than $100 billion in total assets as of year-end 2024 reduced the size of their balance sheets in the fourth quarter. Most notably, JPMorgan Chase & Co. unit JPMorgan Chase Bank NA, the largest bank in the country with 14.4% of the industry's assets, reported a $124.84 billion decrease in total assets.

The banking behemoths masked incremental growth across the rest of the industry. The median change in total assets was 0.5% quarter over quarter.

Funding transformation

US banks were able to generate deposit momentum even while shedding some higher-cost funding. From both an aggregate and median perspective, the industry improved the quality of its funding.

Aggregate nonbrokered US deposits were up 1.6% on a quarterly basis, which led to total deposit growth of 0.8%. More than half of the industry reported no brokered deposits at the end of 2024, and the aggregate change was a 3.6% decline from Sept. 30, 2024.

For total borrowings, the aggregate was down 8.2% quarter over quarter to $1.873 trillion, representing the lowest level since the end of 2022. The median for total borrowings fell 3.4% on a quarterly basis and 20.0% year over year.

Aggregate wholesale funding — total borrowings plus brokered deposits — was down $213.14 billion quarter over quarter.

JPMorgan Chase Bank's wholesale funding decreased $97.20 billion, or 15.5%. In the regional bank sector under $100 billion in assets, Cadence Bank and Hancock Whitney Corp. unit Hancock Whitney Bank — both of which announced an acquisition in January — reduced their wholesale funding by approximately 50%.

Truist Bank, a subsidiary of Truist Financial Corp., went in the opposite direction, increasing wholesale funding by $9.26 billion, or 13.4%, which helped support balance sheet growth.

This analysis, which covers US commercial banks, savings banks, and savings and loan associations, examines fourth-quarter 2024 financial performance based on aggregate and median change because the sector remains dominated by larger institutions that can skew the results. For instance, the four largest banks held 39% of the industry's assets at the end of 2024.

Margin expansion

Less reliance on wholesale funding translated to higher margins. The aggregate net interest margin (NIM) on a fully taxable equivalent basis was 3.20%, up 4 basis points from the third quarter. The median change in the NIM was an increase of 6 bps.

The industry slashed its aggregate cost of funds by 25 bps, more than making up for the decrease of 20 bps in the yield on earning assets. From a median perspective, the industry held the line on the asset yield while lowering the funding cost by 6 bps.

Standouts among regional and large banks included Comerica Inc. unit Comerica Bank, which reported a NIM expansion of 24 bps, and KeyCorp unit KeyBank NA, which reported a NIM expansion of 23 bps. KeyBank's margin benefited from a securities portfolio restructuring.

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Asset transformation

Loan growth remained tepid in the fourth quarter of 2024, at 0.8% on an aggregate basis and 1.1% on a median basis. Most of the banks over the $100 billion threshold reported a higher loan balance.

Huntington Bancshares Inc. unit Huntington National Bank was one of the stars in the group, growing total loans and leases 2.9% quarter over quarter to end the year at $130.6 billion. Huntington Bancshares is projecting its average loans and leases in 2025 will be up 5% to 7% relative to a baseline of $124.5 billion in 2024, according to an investor presentation.

The industry trend for total securities balance was mixed, with the aggregate up 0.4% and the median change at negative 3.1%.

But the trend for securities composition is clear at the aggregate level. Held-to-maturity securities on a cost basis declined 2.6% from Sept. 30, 2024, and were down 18.3% from the peak two years ago. In contrast, available-for-sale securities on a fair value basis were up 2.6% quarter over quarter and 12.3% year over year. JPMorgan Chase Bank had a significant impact on the quarterly changes, as the bank lowered its held-to-maturity portfolio by 8.5% while boosting its available-for-sale book by 21.6%.

The aggregate and median changes were also not in agreement for cash and equivalents. The aggregate balance fell 3.6% during the fourth quarter of 2024, but the median change was an increase of 0.3%. Just two of the 10 largest banks by total assets — Wells Fargo & Co. unit Wells Fargo Bank NA and PNC Financial Services Group Inc. unit PNC Bank NA — reported a quarterly increase.

Minor credit quality deterioration

The ratio of nonperforming assets plus loans that are 90 days past due to total assets increased 4 bps at year-end 2024 from an aggregate perspective and was flat from a median perspective compared to Sept. 30, 2024. On an aggregate basis, the ratio was 0.75%, the highest level since March 31, 2021. Nonperforming assets remained elevated in the commercial real estate office sector.

While the industry median for the ratio of net charge-offs to average loans was close to zero, the aggregate rose 4 bps during the fourth quarter of 2024 to 0.70%, which represents the peak of the last decade. A portion of the increase is from credit card loans becoming a more prominent feature on bank balance sheets.