Rising interest rates helped push U.S. banking profits to yet another all-time high in the second quarter, but they also sent some depositors looking elsewhere for higher returns.
Deposits at U.S. banks and thrifts fell by 2.9% in the second quarter to $13.137 trillion, the first quarterly drop in three years. Year-over-year deposit growth was barely positive at 0.2%, the lowest annual growth rate since the fourth quarter of 1993.
The cost of deposits rose 11 basis points to 0.58% in the second quarter.
Among the 10 largest U.S. commercial banks and thrifts by assets, only Citibank NA posted a quarter-over-quarter increase in total deposits. Six of the 10 companies posted year-over-year increases in deposits.
Deposits at JPMorgan Chase Bank NA, the country's largest commercial bank by assets, fell by 2.1% quarter over quarter. In JPMorgan Chase & Co.'s July 13 earnings call, CFO Marianne Lake said that clients are moving money into investments and managed accounts and do not "appear to be rate-seeking." Lake also said that the bank is capturing the "vast majority" of the deposit shift in its own products, as opposed to seeing that money head to competitors.
Wells Fargo & Co.'s CFO, John Shrewsberry, echoed a similar note, attributing the slowdown in deposits to wealth and investment management customers allocating more cash to alternative, higher-rate liquid investments, according to a transcript of the company's July 13 earnings call.
Meanwhile, net income at U.S. banks and thrifts increased to $60.79 billion in the second quarter, up from $55.95 billion in the first quarter and $48.19 billion in the year-ago quarter. Return on average assets rose 11 basis points quarter over quarter to 1.40% and net interest margin, on a fully taxable equivalent basis, increased 8 basis points to 3.37%.
Total loans and leases grew by 1.1% in the second quarter to $9.857 trillion, led by commercial and industrial loans, consumer loans and commercial real estate.
Credit quality continued to improve as well, with nonperforming assets as a percentage of total assets falling 2 basis points to 0.73%.
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The data in this article was compiled using aggregated call report data for commercial banks, savings banks and savings & loan associations. The aggregated data can be downloaded from the Regulated Depositories section of the Data Wizard of the MI Excel add-in.