Bank Deposits Surge to New U.S. Record in Q1. 17% Annualized

Safened and The Carfang Group are pleased to present our Quarterly Deposit Briefing[1].??Each quarter, we bring you the most up-to-date insights in the USD deposit market with particular focus on banks with $50+ in domestic deposits.??Using our proprietary methodology, we analyze banking, funds flow, brokered deposits, money market and corporate cash data as it is released by the Fed, the FDIC and other third-party sources. To learn more about these findings, join our quarterly liquidity webinar “Yield Enhancements on Your Cash Deposits” on July 15 by clicking?HERE.

Domestic deposits at U.S. banks grew to a record $16.98 trillion in 1Q21.

• 17% annualized growth in the quarter comes atop 23% growth in 2020.
• After years of holding steady at 60% of U.S GDP, domestic deposits grew rapidly during the pandemic and ended the year at 75.9%.??They’ve continued to grow, now at 76.8%.
• Banks in the U.S. have added $3.72T in deposits since the onset of the pandemic.
• Domestic deposits at the ten largest banks grew by 14% annualized.??The $50+ billion cohort added 15%.??All 4,882 banks combined grew at a 17% annual rate.
• The top ten banks saw their deposit share dip slightly from a 48.7% in 2020 to 48.2% today.
• In dollar terms, JP Morgan and Bank of America were the two fastest growing banks.
• In percentage terms, E*Trade, Silicon Valley and Signature Bank led the pack.

Growth of non interest-bearing deposits continued to outstrip interest bearing deposits.

• Non- interest bearing deposits (NIB) grew at a 36% annualized pace in 1Q21.
• Interest bearing (IB) deposits grew at a 10% annualized pace in 1Q21.
• These gains follow 46% and 16% increases respectively in 2020.
• Silicon Valley, Comerica, City National and Zions derive the largest ratio of deposit funding from NIB.??
• Many broker-dealer affiliated banks derive 100% of their deposit funding from IB deposits (see the League Tables which follow).
• Across all U.S. banks, IB deposits fell to 70.6% of total domestic deposits from 71.7% at year-end.??The pre-pandemic share was 76.1% so this is a significant shift.

Insured deposit?growth (18.8% annualized) slightly exceed?uninsured deposit?growth (14.3% annualized).

• This is a sharp reversal from 2020 during which uninsured deposits grew by 33% while insured deposits were up a comparatively small 17%.
• Growing by $64B, JP Morgan alone accounted for one fourth of all the first quarter uninsured deposit growth in the U.S.??Silicon Valley at $14B was second.??Morgan Stanley, Bank of America and State Street each grew uninsured deposits by $12B.
• In the Insured deposit category, the more traditional universal banks such as JP Morgan, Bank of America, Wells Fargo, Citibank, Truist, PNC Bank and U.S. Bank set the pace.

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Brokered deposits?continue to show remarkable stability in the face of a market flush with deposits, especially at larger banks.

• FDIC insured brokered deposits held steady at 87% of the total while 13% of brokered deposits were uninsured.
• At $1.10T, brokered deposits dipped by only $37B in the quarter and are a meaningful 7.1% of total domestic deposits.
• The largest banks (>$50B in deposits) held an even higher proportion at 7.8% of total U.S. domestic deposits.
• Six banks each have over $50 billion in brokered deposits.??They are TD Bank, Bank of America, Citibank, E*Trade, JPMorgan and Goldman Sachs.??
• Together, these six banks sourced $485 billion via this channel, accounting for 44% of all brokered deposits.

Largest U.S. Banks

As mentioned, growth was fairly consistent across U.S. banks of all sizes.??J.P. Morgan, with 6% deposit growth slightly widened its lead over Bank of America, Wells Fargo and Citi which grew deposits by 3%, 1% and 0% respectively in the first quarter.??However, the 6% growth in the quarter (26% annualized) is slower than J.P. Morgan’s 38% deposit growth during 2020.?

The top ten banks saw their deposit share dip slightly from a 48.7% share in 2020 to a 48.2% share at the close of the first quarter.??However, their share of uninsured deposits actually fell more significantly from 52.0% to 50.8%.

Fastest Growing U.S. Banks

E*Trade Bank led the list of the fastest growing U.S. banks and banks with assets greater than $50 billion.??Its 33% growth in 1Q21 almost matches it full year 2020 pace of 39%.

Six of the ten fastest growing banks of 2020 continued their momentum and are part of the 1Q21 top ten list.??In addition to E*Trade, they are Silicon Valley, Signature, State Street, City National and J.P. Morgan.?

Brokered Deposits

Brokered deposits accounted for 7.1% of all U.S. deposits and a slightly higher 7.8% for banks in the $50B+ tier.??Six banks have over $50 billion in brokered deposits.??They are TD Bank, Bank of America, Citibank, E*Trade, JPMorgan and Goldman Sachs.??Together, these six banks sourced $485 billion via this channel, accounting for 44% of all brokered deposits.

Conclusion

To the surprise of many who thought the 2020 23% U.S. deposit surge would reverse, the 1Q21 pace slowed only slightly to a still torrid annualized 17% in the first quarter of 2021.

Thus, the uncertainty continues to play out in 2021 as banks must now reoptimize their deposit portfolios.?Many of the same questions remain.??Will liquidity still be king, or will depositors begin to seek more yield???How will accommodative monetary policies impact interest rates and the shape of the yield curve???Will the shortfall in the FDIC’s reserves below the Dodd-Frank statutory minimum impact depositor behavior?

These are questions we want to help you get right as you chart your course in this most challenging environment.??Sign up?HERE?for our July 15 quarterly liquidity briefing “Yield Enhancement on Your Cash Deposits”.??This program is designed especially for bankers, money market professionals, corporate treasurers, institutional investors, family offices and wealth managers.??Participants will hear from leading market experts and learn about current deposit and corporate cash trends as well as a deep dive into deposit opportunities with GCC banks. Panelists will also discuss current topics in financial markets, regulations and technology.

Here are two other liquidity related articles that might be of interest to you:

"Corporate Cash Falls. Money Funds Hit 24 Year Low as % of Corporate Cash."

"Brokered Deposits: How banks are utilizing this key channel in the digital age."

About The Carfang Group

We advise our clients on the strategic and regulatory issues surrounding Treasury Management, Payments, Liquidity and Transaction Banking.??We oversee the deepest and broadest LinkedIn groups on key Treasury, Banking, Liquidity, Payments and Regulatory topics via our Idea Exchange and Career Network.??Visit?www.thecarfanggroup.com.??Contact Tony Carfang at?[email protected].

About Safened

Global Liquidity Platform, an investment alternative for USD liquidity.

Safened US Inc. is a member of FINRA and Fintech broker-dealer that has developed an innovative and efficient B2B deposit platform.??This unique platform seamlessly connects high quality global Partner Banks with Corporate Clients, providing banks with additional alternative wholesale funding tools and Corporate Clients with a convenient, diversified deposit product.??Visit?www.safened.com.??Contact Graeme Henderson at?[email protected].

Safened US, Inc. (“Safened US”) is a broker-dealer registered with the SEC, a member of FINRA and a member of SIPC.

This document is only intended for institutional recipients and is being provided for informational purposes only. None of the information contained herein shall be deemed to be a contract for the sale of any investment products.??This document does not constitute a solicitation or offer to buy or sell any securities, deposit notes, futures, options or other financial instruments or investments, or the provision of any investment advice or service.

?No representation or warranty of any kind, express or implied, is given by Safened US, its affiliates or any of their respective members, partners, directors, employees, representatives or agents as to the accuracy, completeness or fitness for any purpose of the information contained herein. The only representations and warranties that will have any legal or binding effect are those made by the parties to the proposed transaction in a definitive, written agreement, subject to such limitations and restrictions as may be specified therein.??None of Safened US, its affiliates and their respective members, partners, directors, employees, representatives and agents accept liability of any kind for the contents of this document and each disclaim all responsibility for the consequences of any person acting, or refraining from acting, in reliance thereto.

[1]?All of the bank ranking tables in this paper are drawn from the universe of forty-five banks with 1Q21 US domestic deposits in excess of $50B.??Please see our contact information at the end of this paper if you would find additional peer group datasets helpful.??With several trillion dollars of deposits in flux, getting your strategy right is paramount.??The Quarterly Deposit Briefing is an essential tool in refining that strategy.?