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Data: Federal Reserve; Chart: Axios Visuals

U.S. banks are seeing deposits skyrocket and are pulling back on loans in the face of the coronavirus pandemic, newly released data from the Federal Reserve show.

Why it matters: It's the latest sign of trouble for the banking sector and the economy — a signal that consumers and businesses aren't starting new projects or focusing on growth, and are instead socking away cash.

By the numbers: The Fed's latest report on assets and liabilities of commercial banks shows that while banks have radically stepped up commercial and industrial loans, consumer loans have fallen precipitously.

  • Commercial and industrial loans rose year over year by 116.8% in March, 170.4% in April and 37.6% in May, in large part because businesses have been drawing on lines of credit.
  • Overall, consumer loans declined by 24.7% in May after a 41.7% decline in April.
  • Credit cards and other revolving plans saw 73.7% and 43.7% year-over-year declines in April and May.
  • Residential real estate loans and real estate loans overall also ticked down notably in May.

At the same time, deposits rose at a historic pace, adding to the $1.85 trillion of deposits reported by just the top 50 U.S. banks in the first quarter.

  • In April alone, deposits rose by $865 billion, more than the previous record for an entire year. In May, deposits gained again, rising by $604 billion.
  • After a brief decline during the week ended June 3, deposits again increased during the week ended June 10 by $85 billion.

Between the lines: It's more bad news for banks following a quarter in which profits fell 70%.

  • The FDIC noted in a recent report that “deteriorating economic activity” caused lenders to write off 15% more delinquent debt than the previous year and set aside $38.8 billion to cover potential loan losses, up nearly 280% from the prior year.
  • More than half of all banks reported a profit decline, and 7.3% of lenders were unprofitable in Q1. The amount of non-current loans rose 7.3% from the previous quarter, the biggest increase since 2010, according to the FDIC data.

The big picture: In addition to skittish consumers, banks have tightened their lending standards and are being "as conservative as possible, especially with people that aren't existing customers," Stephen Scouten, a bank analyst with Piper Sandler, said in an S&P Global Market Intelligence report last week.

  • "Bankers don't really have a clue yet what losses are going to look like."
  • "In terms of true new business, new customer production, they're going to be extremely cautious."

Go deeper: Marc Benioff and PayPal back payday loans alternative Even

Go deeper

Sep 28, 2020 - Politics & Policy

Democrats on Trump tax story: "This is a national security question"

House Speaker Nancy Pelosi said Monday that the New York Times report that President Trump has hundreds of millions of dollars in debt coming due within the next four years is a "national security question," and that the public has a "right to know" the details of his financial obligations.

The big picture: Democrats have already leapt on the Times' bombshell, which Trump has dismissed as "total fake news," to attack the president for allegedly paying less in federal income taxes than the average middle-class household.

Dion Rabouin, author of Markets
Sep 29, 2020 - Economy & Business

Jerome Powell, Trump's re-election MVP

Photo illustration: Annelise Capossela/Axios. Getty Images photos: Andrew Caballero-Reynolds/AFP and Lev Radin/Pacific Press/LightRocket

President Trump trails Joe Biden in most polls, has generally lower approval ratings and is behind in trust on most issues. Yet polls consistently give him an edge on the economy, which remains a top priority among voters.

Why it matters: If Trump wins re-election, it will largely be because Americans see him as the force rallying a still-strong U.S. economy, a narrative girded by skyrocketing stock prices and consistently climbing U.S. home values — but the man behind booming U.S. asset prices is really Federal Reserve chair Jerome Powell.

10 hours ago - World

Maximum pressure campaign escalates with Fakhrizadeh killing

Photo: Fars News Agency via AP

The assassination of Mohsen Fakhrizadeh, the architect of Iran’s military nuclear program, is a new height in the maximum pressure campaign led by the Trump administration and the Netanyahu government against Iran.

Why it matters: It exceeds the capture of the Iranian nuclear archives by the Mossad, and the sabotage in the advanced centrifuge facility in Natanz.