Deposits At Online Banks Are Increasing While Regionals Struggle

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The Wall Street Journal reports that these banks have gained more deposits than they have lost thus far this year, in contrast to regional lenders like Truist, Citizens Financial, and PacWest, whose deposit totals have decreased.

Banks including Capital One, Ally Financial, and Marcus by Goldman Sachs reported increases in quarterly deposits at the same time.

During an earnings call in April, Capital One CEO Richard Fairbank said, “The future of everything in banking is digital.”

The past financial crisis, which scared customers into shifting their money to larger lenders, and increasing interest rates, which drive consumers to move money to things like money market funds for better payouts, are two problems that regional banks are reportedly grappling with.

The Federal Deposit Insurance Corp. (FDIC) stated this month that banks’ deposits fell by $472 billion in the first quarter of 2023, the largest drop in over 40 years of record collection.

Furthermore, the St. Louis Fed reported on Friday (June 2) that total bank deposits decreased nearly $13 billion in April, “which would push the decline even further out than the FDIC data.”

The WSJ analysis mentioned the high expense of maintaining a traditional bank. A bank in Tampa can cost up to $500,000 per year to operate, but a midsized branch in New York will cost more than double that amount.

At the same time, technology, according to the research, contributed to the deposit runs on Silicon Valley, Signature, and First Republic banks, since internet banking made it relatively easy for clients to withdraw their money.