Total bank deposits increased year-over-year during the second quarter, to $17.406 trillion from $17.270 trillion, according to FDIC data. Banks surveyed by S&P Global Market Intelligence reported heightened deposit competition over the past 12 months, when rates were at the peak of the recent hiking cycle. With the Fed now cutting rates, bankers expect deposit competition to stay steady or subside for the rest of the year.
Another S&P post discussed how the share prices of banks with heavy CRE exposure continue to underperform the broader industry, but that the divergence is starting to narrow.
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Rob Blackwell
Chief Content Officer and Head of External Affairs
IntraFi
Arlington, VA
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Several things should be noted here.
Domestic deposits according to the FDIC Quarterly Profile for 06/2024 declined 1.13% in the second quarter as they dropped by $197 billion. This decline has occurred even before Fed Funds rates began to lower in September. So as banks pay less for deposits what do you expect to happen to the volume of deposits available to banks?
Brokered deposits as of 06/2024 were $1.329 trillion, up from $649 billion just two years ago. Brokered deposits are now 45% of the total time deposits. The industry has outsourced a significant portion of their supply chain for bank funding.
Lowering Fed Funds target rates simultaneously with healthy current and anticipated levels of GDP and unemployment accompanied by historically high inflation rates and low loan/deposit rates could be called a bold experiment as it is inconsistent with past periods of Fed reductions of the overnight rates. It is difficult to forecast anything but greater competition for deposits as the reward for putting money in a bank diminishes. Keep in mind that the banking industry has significantly reduced the friction for efficiently and conveniently moving money out of banks and many people are now interest rate sensitive. So, counting on complacency could be a very naive bet.
The best and brightest bankers I know are expecting deposit competition to become greater as we go forward. What do you think?
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Neil Stanley
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Original Message:
Sent: 09-25-2024 15:47
From: Rob Blackwell
Subject: Deposits Grow, CRE Banks Narrow Stock-Performance Gap
Total bank deposits increased year-over-year during the second quarter, to $17.406 trillion from $17.270 trillion, according to FDIC data. Banks surveyed by S&P Global Market Intelligence reported heightened deposit competition over the past 12 months, when rates were at the peak of the recent hiking cycle. With the Fed now cutting rates, bankers expect deposit competition to stay steady or subside for the rest of the year.
Another S&P post discussed how the share prices of banks with heavy CRE exposure continue to underperform the broader industry, but that the divergence is starting to narrow.
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Rob Blackwell
Chief Content Officer and Head of External Affairs
IntraFi
Arlington, VA
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