US banks are witnessing a big increase in deposit flight from their customers.
According to newly updated stats compiled by the Federal Reserve Economic Data (FRED) system, $78 billion exited American bank accounts from July 5th through the 12th.
The deposit exodus follows a two-week period of relative stability in the system as big banks invest significant levels of cash to third party intermediaries to bring in new deposits.
Banks are feeling the pressure to compete with higher yielding money market accounts.
And JPMorgan Chase CEO Jamie Dimon just issued a warning to shareholders on the banking sector’s need to keep up with demands for higher rates and avoid further deposit flight, reports the Wall Street Journal.
“There is very little pricing power in most of our business, and betas are going to go up.”
Autonomous Research analyst Brian Foran says Dimon’s alert represents a “definite curb your enthusiasm moment” for banks after an industry-wide surge in second-quarter profits.
According to the Fed, $742 billion in deposits has left the banking system in the last year, and US banks now have a total of $17.28 trillion in deposits on their balance sheets.
US banks are also bracing for fallout in the commercial real estate sector fueled by the emergence of remote and hybrid work environments.
A recent report from S&P Global Market Intelligence found 576 American banks are overexposed to commercial real estate loans based on regulatory guidelines, which represents an increase of 30% compared to one year ago.
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