Deposits at US Banks Fall By $76.2 Billion, Mainly Due To Large Institutions

In the wake of the string of bank failures last year, US bank deposits dropped last week, which was a sign that the financial system remains unstable.

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In the week ending April 12, deposit growth dropped by $76.2 billion, according to seasonally adjusted data released by the Federal Reserve on Friday. The decline was mainly due to small banks and large institutions, but also large institutions such as foreign banks.

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On the other hand, loan and lease growth for institutional clients was up $13.8 billion in the period when adjusted for seasonality. However, when unadjusted for seasonality, loans and lease growth was down $9.3 billion in the period.

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In terms of deposit growth, there were mixed results. Deposits returned to decline in the preceding week after a dramatic jump following the failure of Silicon Valley Bank and others last month. They had dropped sharply last month in the wake of their failure, and are now at their lowest point in almost two years.

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However, lending increased for the second week in a row, with the residential and consumer loan sectors leading the growth, suggesting that credit conditions have started to stabilize.

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After several lenders collapsed last month, economists are closely monitoring the Fed's H.8 report, which provides an estimate of the total weekly balance sheet for all commercial banks in the US. Analysts are closely monitoring this report in order to gauge credit conditions as a result of the collapses of several lenders.

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In the months ahead, tighter credit standards are expected to pose a serious headwind for the economy as tighter lending standards are seen as a potential threat to economic growth. However, overall inflation may be brought down more rapidly than anticipated, according to Trade Algo.

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A number of regional banks published earnings reports this week that indicated they expect to earn a lower level of income from their loan operations this year, which were followed by the data published in this report. In addition to KeyCorp and Fifth Third Bancorp, other companies had cut their projections for net interest income, whereas Zions Bancorp had a lower projection for net interest income.

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Although the quarter's most closely watched metric - deposit levels - remained relatively stable for firms such as Fifth Third Bank and Truist Financial Corp. during a time when customer withdrawals had contributed to the collapse of three of their competitors, though that is not a good sign.

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As Fed officials have said, tighter credit conditions will be helpful in the process of accomplishing their work, which could result in a less urgent need for further interest rate hikes, if further rate hikes are not needed. Although inflation remains far too high, policymakers are still expected to raise interest rates by a quarter point at their meeting next month.

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Real Estate for Commercial Use

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A study published by the National Association of Home Builders indicates that nearly three-fifths of the country's loans are given out by the 25 largest banks, although smaller banks are most important in certain areas, including commercial real estate. 

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A total of $86 billion was lost by banks across the board, led by large banks whose assets plummeted by around $86 billion.

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In the context of this report, it is prudent to keep in mind that it focuses on the commercial bank universe. We find that it is sometimes distorting to use financial data based on assets divested to non-bank institutions - as was the case when Signature Bank retained its assets in receivership after going under.

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Approximately 875 domestically chartered banks and foreign-related institutions participated in the survey, with a total of about 875 banks reported data weekly on their financial condition.

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