Bank deposits, fees up as Cos, consumers hoard cash
With profits and margins at alltime lows, the U.S. banking system is in flux as customer deposits surge and make the safety net for failures fall below a legal limit, The Wall Street Journal (WSJ) reports.
The coronavirus pandemic's disruptions have left banks "flooded with cash and it's hard to know what to do," said Brian Foran, an analyst at Autonomous Research, according to WSJ. The information came from the usually-rote quarterly industry report from the Federal Deposit Insurance Corp. Profits, the report found, were around $18 billion across both the first two quarters this year - a massive downward trend from the near $55 billion from 2019.
Meanwhile, increased credit loss provisions came from the banks trying to put away money to shield against future loan troubles, an especially pertinent fear in the pandemic environment with all its uncertainty. The report said there was $62 billion stored away in the second quarter, on top of the already-high $53 billion from the first. Those numbers were huge increases from the past several years, which never saw credit loss provisions going above $20 billion.
The biggest banks put away around $33 billion in anticipation of loan losses, including J.P. Morgan setting aside $10.47 billion, with CEO Jamie Dimon saying the purpose was to brace for the uncertain economy and people maybe not being able to pay loans back.
Lending margins - the difference between what banks make on loans and pay on deposits - shrank to 2.81 percent, WSJ reported, down from 3.39 percent a year prior.
But while all that was going on, customer deposits increased over $1 trillion for two quarters in a row, totaling $2.4 trillion added in just six months. That number is five times higher than any other six-month period, and comes from corporate customers stockpiling to help save their businesses and consumers with nowhere to go having less to spend, WSJ wrote.
Donald Trump opened his bid for a second term after securing the Republican nomination Monday, with his party launching its national convention as the US president claims Democrats want to "steal" the election that polls currently show him losing. Minutes after the party completed the nomination vote confirming Trump as candidate on November 3, he appeared at the convention in Charlotte, North Carolina, to deliver a rambling, often dark speech lasting close to an hour.
From the opening words, he told Republicans to be on alert for what he claimed was a Democratic plan to rig the contest through increased use of mail-in voting a measure Democrats say is needed to protect people from catching COVID-19 in crowded polling stations. "They are trying to steal the election," he told party delegates, many of whom were wearing masks. "The only way they can take this election away from us is if this is a rigged election."
Opponents say Trump's increasingly extreme resistance to expanded mail-in voting a method already used widely in the United States -- is an attempt to suppress voter turnout, while setting up an excuse to challenge the result if he is defeated.
Polls show Trump trailing
Democratic candidate Joe Biden, who had his convention last week, as Americans turn on the president's handling of the coronavirus pandemic and subsequent economic chaos.
Trump hopes the convention, which concludes Thursday with his formal acceptance of the nomination, will shift voters' attention from the coronavirus to what he says is the "super V" shaped economic recovery.
Prime time coverage kicked off Monday night with a celebration of "rugged" American individualism and Trump's fighting spirit, as a voiceover lauded Trump's "swift action" to save lives during the coronavirus pandemic.