The Big Banks “Swimming in Money” 💸

The Big Banks “Swimming in Money”

After a slow start to the post-corona rally, “growth has been nothing short of extraordinary,” says Autonomous Research analyst Brian Foran. In his own words, the big banks are like “Scrooge McDuck swimming in money!”

The biggest driver of their success has been millions of worried people withdrawing from investments and moving cash into sheltered savings accounts. It’s assumed that most citizens saved their lockdown benefits and stimulus checks, which the banks helped to service. There were even businesses parking their bailout funds in bank accounts, like Ford and Boeing, creating a true deposits bonanza like we’ve never seen before!

It’s agreed, then; the banks are bloated, but the deposit book isn’t what investors take home. We need to understand deposits as being core to how banks make us money as effective loan shops – that’s what counts.

The bank pays a rate of interest to savers on their deposits and keeps a reserve of those deposits within easy reach for withdrawals. It takes the rest and loans it out, essentially re-depositing the deposits with more people. The aim is for those people to pay more in interest rates to the bank than the bank pays to its resident savers.

We’ve got a long period of zero and negative interest rates ahead, worldwide, so banks are comparing pittances for pittances. To make things interesting, they need to lend to higher risk-higher reward borrowers. This is called a reach-for-yield or dash-for-trash.

It’s a good predictor of a financial crisis. The banks took in more deposits in the month of April than in any full year on record. There’s an underwhelming runway of low rates on the horizon, so could our bankers be getting ideas?

Share:
More Posts
Get your daily Invstr Crunch

Get the market news and updates you need, delivered to your inbox or available on our daily podcast.

Risk Disclosure:

Invstr is not a bank and banking services are provided by Vast Bank, N.A.

Brokerage and Banking services are currently only available to U.S. residents.

Invstr app and web services are provided by Invstr Ltd. Advisory services are provided by Invstr Financial LLC, an investment adviser registered with the Securities Exchange Commission (SEC) details of which can be obtained here. Securities brokerage and custody services are provided by Apex Clearing, a broker dealer registered with the SEC and a member of FINRA and SIPC. There is no bank guarantee on securities and securities may lose value.

Investing involves risk and can lead to losses. Past performance does not guarantee future results.

Invstr app and web services are provided by Invstr Ltd. Invstr+ advisory services are provided by Invstr Financial LLC, an investment adviser registered with the Securities Exchange Commission (SEC). Securities brokerage and custody services are provided by Apex Clearing, a broker dealer registered with the SEC and a member of FINRA and SIPC. There is no bank guarantee on securities and securities may lose value. Vast Bank N.A. a nationally chartered bank and member of the FDIC, provides the banking products, including the products and services related to digital asset accounts. As with any asset, the value of Digital assets can go up or down and there can be a substantial risk that you lose money buying or holding digital assets. You should carefully consider whether trading or holding Digital assets is suitable for you in light of your financial condition. Your digital account does not support wallet to wallet transferring of your digital assets (i.e. cryptocurrencies) outside the platform. Any Digital Assets in your digital asset account are not insured by any government entities, including but not limited to FDIC or SIPC. The Invstr Visa® Debit Card is issued by Vast Bank, N.A. pursuant to a license from Visa U.S.A Inc and may be used everywhere Visa debit cards are accepted. Invstr Ltd, Invstr Financial LLC and Invstr Securities Ltd are subsidiaries of Marketspringpad Holdings (collectively “Invstr”) and Invstr is solely responsible for the application services and website content.

Watchlists provided when users first access the service are not a recommendation to invest. Instead they are provided to help users better navigate the service. Users are free to edit and create their own watchlists. From time to time, Invstr will suggest instruments solely based on an individual’s interest and the interest levels of the Invstr community. The statistical and portfolio builder models generated by Invstr do not reflect actual investment results and are not guarantees of future results. Comments provided by Invstr leaders, influencers or members of the Invstr Community are not recommendations and should not be construed as such. Invstr does not endorse the content or the positions posted by them. Their investment approach, and that of the models provided by Invstr, may be different from yours and may not be appropriate for you.