Highlight of the Week
Deposits are Trending Down in 4th Quarter Earnings
- Wells Fargo, BofA, and JPMorgan reported that total deposits were down 5%-7%
- The BofA CEO stated that the primary reason for this trend is the increased movement of money from deposits to higher-yielding money market funds, treasury securities, and other high-yielding products
- Additionally, less affluent customers are spending down their stimulus from the pandemic as inflation continues to push costs up
Rate Curves
Rapid Report:
Silvergate and Signature Suffer Losses Due to Crypto
- Silvergate Capital lost nearly two-thirds of its asset value due to crypto volatility
- The bank lost $8 billion dollars in crypto-related deposits which forced the bank to sell off securities and assets to raise cash leading to a $700 million loss
- By comparison, Signature Bank, which also holds digital deposits but is focused on more traditional banking activities, digital deposits fell $12.4 billion in the fourth quarter which was a total deposit decline of 14%
- Despite the digital deposit runoff, the diversified businesses of Signature posted a profit of $300 million in the 4th quarter compared to Silvergate who reported a $1 billion loss
- This story demonstrates that Banks with digital asset exposures should be evaluated for liquidity risk considering the decline in these liabilities
Layoffs hit the Banking Industry as 2023 Ramps Up
- In addition to the wave of layoffs coming from the Tech industry such as Amazon, Microsoft, and Salesforce, Banks are starting to cut costs as a recession looms
- Goldman Sachs is planning to cut 3,200 after a disappointing fourth quarter
- BNY Mellon plans to cut 3% of its workforce which amounts to ~1,500 employees
- Morgan Stanley ended 2022 by laying off 1,200 people
- Despite the prevailing employment trend, BofA and JPMorgan continue to hire selectively with no plans to make deep employment cuts
