Big U.S. banks hungry for loans and capital relief as deposits pile up

By Imani Moise and David Henry

Jan. 20 (Reuters) – A wave of deposits during the coronavirus pandemic has put major U.S. banks on their backs, with executives saying they hope regulators will ease rules that punish inflated balance sheets until the loan request comes back.

JPMorgan Chase & Co, Bank of America Corp and Citigroup collected more than $ 1,000 billion in deposits last year, up from an increase of $ 92 billion in 2019.

In a more normal economy, that kind of boost would be great, allowing banks to lend more or just invest the money in short-term, low-risk securities like treasury bills. But stimulus payments and the government’s easy money policies that led to the flooding of deposits also created some problems for banks: low interest rates which limit loan profitability and sluggish loan demand. as customers and businesses flood with cash. spend less.

Combined with rules that require more capital for larger balance sheets, this makes deposits more expensive to hold, rather than profitable.

“Excess cash is building up,” Bank of America CFO Paul Donofrio said on a conference call Tuesday after the bank announced record growth in deposits.

Profit margins on new deposits are “virtually zero,” JPMorgan CFO Jennifer Piepszak said last week.

Citigroup’s $ 210 billion increase in deposits pushed it into a new range under Fed rules, forcing the bank to hold more capital, the bank said last week.

Big banks won’t shy away from deposits because of the momentum, executives said, as it could hurt their franchises. However, they pushed regulators to extend capital relief programs that expire on March 31. Banks also want adjustments for non-high risk holdings, like US Treasury securities.

“It’s a problem for us in the short and medium term if we don’t get the extension,” Piepszak said. (Reporting by Imani Moise and David Henry Editing by Lauren Tara LaCapra and David Gregorio)

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