Bank Deposits Up 13.5 Percent In 2009
March 26, 2010
Nothing like a little financial Armageddon to make you want to become a conservative investor.
According to the recently released FDIC Quarterly Banking Profile, bank deposits were up 13.5 percent, or $641 billion, in 2009. These huge numbers are hugely important for the banking system.
Big Banks Safer Than Before
One headline from the FDIC report is that big banks like Chase (or JP Morgan, if you prefer), Wells Fargo, Bank of America, and Citibank are in much better shape than they were when the banking crisis started.
These bigger banks have been able to attract enough money market accounts, CDs, savings accounts, and checking accounts to weather the storm and even come out of it in a strong position. Big banks have also benefited from increased need for corporate funding of mergers and such.
Smaller Banks Can't Lend Anymore?
On the other side of the spectrum, the FDIC Quarterly Banking Profile shows that smaller banks are hard-pressed to make any loans at all, and are relying extremely heavily on deposits to remain in business.
According to the FDIC, there are now about 8,000 small and community banks left in the U.S. Of that number, approximately 4,100 have enough bad loans on their books to where these banks cannot make new loans with any degree of confidence or certainty.
This does not necessarily mean that these banks are in danger of going under, however. These smaller community banks have been doing well taking in deposits in the form of CDs, money market accounts, savings accounts, and checking accounts, and then investing that money in low risk U.S. Treasury bonds.
Essentially, this deposit-based business is easy money for the small banks. It's just not enough money to jump start lending to homeowners and businesses.
