Thursday’s Depositor Flight Lowers Bank Market Values

Financial equities fell Thursday as investors worried about banks’ unrealized securities losses.

The Wall Street Journal (WSJ) stated Thursday that the top four U.S. banks lost $52 billion in market capitalization, with JPMorgan losing $22 billion, Bank of America losing $16 billion, Wells Fargo losing $10 billion, and Citigroup losing $4 billion (March 9).

Investors responded to SVB Financial Group selling part of its securities portfolio at a $1.8 billion loss due to deposit outflows.

Because banks invested in bonds when rates were low, they have more than $600 billion in unrealized losses on securities holdings. The research says rising rates have lowered bond prices.

The article noted that banks only have to sell their bonds at a loss if they lose deposits, as happened at SVB Financial Group, yet investors’ anxieties prompted financial stocks to plummet.

Due to a historic deposit decrease, banks have forced to raise deposit rates to attract customers from higher-yield alternatives.

Bloomberg News reported Monday that commercial bank deposits fell for the first time since 1948 as clients moved to Treasury bills and money market funds (March 6).

The article said banks are raising their rates, notably on CDs.

Digital-first financial organizations can attract new customers as consumers switch from big banks to high-yield savings.

Most big banks’ ordinary non-interest-bearing accounts will likely be shifted to traditional financial institutions’ CDs and high-yield savings accounts.

As reported on Feb. 14, many bank clients may be considering or have already switched to a digital-first bank. Consumers flock to neobanks for their higher interest rates on normal checking and savings accounts.