JPMorgan’s Deposit Base Has Swelled By Over 8% In The Past Year

by Trefis Team
-0.15%
Downside
98.14
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Trefis
JPM
JPMorgan Chase
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The five largest U.S. banks held deposits worth well over $5.2 trillion worldwide in Q1 2017 – representing a little more than 40% of all deposits held by U.S. commercial banks. JPMorgan has the largest deposit base among U.S. banks, with Wells Fargo ranking #2. However, JPMorgan has ~20% of its deposits outside the U.S. in comparison to less than 10% for Wells Fargo, because of which the latter has the largest deposit base in the country. Taken together, these banks hold over 40% of the total deposits (domestic as well as foreign) across U.S. commercial banks.

CB_QA_DepositsChange_17Q1

Total deposits for these five banks have grown by more than 6% over the last five quarters. This is a considerably high growth rate given the massive deposit base managed by these banks. Moreover, it is above the 5.5% growth in total deposit base for all U.S. banks over the same period. It should be noted here that Citigroup’s deposit base is very sensitive to foreign exchange fluctuations due to roughly half its deposit base being outside the U.S. This explains the growth rate of just 3% for Citigroup’s deposits over the last twelve months. However, JPMorgan’s exceptionally strong 8.4% growth in deposits more than made up for Citi’s shortfall in the total figure.

Deposits across U.S. commercial banks have grown sharply since 2010 due to the low interest rates prevalent since the economic downturn. This is because the resulting lack of lucrative investment options forced investors to shift a bulk of their liquid assets into interest-bearing deposits. The interest rate environment has improved considerably over recent quarters, though, thanks to the Fed’s rate hikes. With the outlook for the U.S. economy remaining positive, and with the Fed aiming to raise interest rates at least three times a year over 2017-2019, individuals and institutions will likely shift to investment options with better yields going forward. This should result in deposit growth rate falling to 2-3% annually over the coming years, from the figures in excess of 6% seen over 2012-2016.

The chart below shows JPMorgan’s retail banking deposit base over the years and our forecast for it going forward. You can see how changes to this figure affects our price estimate for the bank by modifying the forecast.

See full Trefis analysis for U.S. Bancorp | Wells Fargo | JPMorganBank of America | Citigroup

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