• $78 billion exited American bank accounts from July 5th through the 12th.
• JPMorgan Chase CEO Jamie Dimon issued a warning to shareholders on deposit flight.
• S&P Global Market Intelligence found 576 American banks overexposed to commercial real estate loans.
Deposit Flight From US Banks
Recently, American banks have seen an increase in deposit flight from their customers, with $78 billion exiting accounts between July 5th and 12th according to Federal Reserve Economic Data (FRED). With big banks investing significant cash reserves into third party intermediaries in order to bring in new deposits, competition is fierce and JPMorgan Chase CEO Jamie Dimon has issued a warning to shareholders on the banking sector’s need to keep up with increasing demands for higher rates.
Competition For Higher Yielding Money Market Accounts
The pressure for banks to compete with higher yielding money market accounts has led to Autonomous Research analyst Brian Foran stating that big bank CEOs’ warnings are “definite curb your enthusiasm moment” after second quarter profits surged across the industry. As many US banks are bracing for fallout in the commercial real estate sector due to emergence of remote and hybrid work environments, S&P Global Market Intelligence reported that there is now 30% more overexposure of American banks than one year ago – totaling 576 institutions at risk of this loan type.
JPMorgan Chase CEO’s Warning
In response to these trends, JPMorgan Chase CEO Jamie Dimon released a statement urging shareholders to take action against further deposit flight or else face consequences: “There is very little pricing power in most of our business, and betas are going to go up.” This call-to-action highlights the urgency felt by many large financial institutions as they look for ways balance out fluctuating capital flow while trying maintain investor confidence.
Future Outlook
Overall, it appears that US banks may be entering a period of increased volatility where smaller institutions should pay special attention as they feel the brunt of larger competitors gaining greater control over capital flows and interest rate markets. Moving forward, it may be prudent for investors and depositors alike to consider alternative sources of income such as cryptocurrency investments or money market accounts outside traditional banking sectors as deposit flight continues on its upward trajectory.
Conclusion
In summary, US banking systems have been experiencing major deposit flight during recent weeks which has prompted warnings from JPMorgan Chase CEO Jamie Dimon regarding pricing power issues within the industry. Additionally, S&P Global Market Intelligence recently discovered more overexposure risks among smaller US banks when it comes commercial real estate loans which could lead even further instability throughout financial markets if not addressed soon enough.