Apr 21, 2023 - Economy

People aren't giving banks free money anymore

Data: FactSet, company filings; Chart: Axios Visuals

Regional banks are seeing declining deposits as people remember that banks should actually pay them interest on their money.

Driving the news: Large regional banks reported quarterly results on Thursday — and declining deposits were a common theme.

Be smart: The decline in deposits doesn't mean regional banks are facing a loss of confidence from depositors.

  • That would be a bank run, the type of phenomenon that led to the rapid demise of Silicon Valley Bank last month.
  • Rather, SVB's troubles seem to have refocused consumers on the idea that they can move deposits around — and now that rates are higher, there are big incentives to do so.

What they're saying: "We saw declines in retail deposits, driven by elevated spend due to inflation, normalization from pandemic levels and changing client behavior due to higher rates," said Clark Khayat, CFO of Cleveland, Ohio-based KeyCorp.

  • "Deposit outflows during mid-March were primarily related to [corporate and commercial] clients who chose to diversify the money market mutual funds and in some cases across multiple banks," said William H. Rogers, chief executive of Truist, a regional bank based in Charlotte.
  • "The battle for retail deposits continues to be very competitive," said James C. Leonard, CFO at Cincinnati's Fifth Third Bank.

The bottom line: For the first time in a long time, banks are going to compete to pay you more for your money. It might be worth investigating.

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