Large US Banks Saw Over $7BN Deposit Outflows Amid NYCB Chaos Last Week

With the imminent expiration of The Fed’s bank bailout facility (reminder they were 12-month collateralized term loans), and the ongoiong liquidity suck from The Fed’s reverse repo facility, the last two weeks’ excitement over at NYCB again is sure to have seen some depositors questioning their decisions (but we won’t know about that for a couple of weeks as The Fed needs time to ‘manage’ the data).

It turns out no… as The Fed claims that – on a seasonally-adjusted basis – total deposits rose by $16BN last week…

Source: Bloomberg

And while we question what a “seasonally-adjusted deposit” actually is, un-adjusted deposits rose by an even more impressive $86BN last week to the highest in six weeks…

Source: Bloomberg

But, things get a little more complicated when we remove foreign bank deposits, as while non-seasonally-adjusted deposits rose $61BN (large banks +$35BN, small banks +$26BN), seasonally-adjusted domestic bank deposits fell $5.6BN (large banks -$7.4BN, small banks +1.8BN)…

Source: Bloomberg

On an SA basis, it’s not been a good run for domestic banks (or it has been a good ‘run’)…

Source: Bloomberg

On the other side of the ledger, loan volumes re-accelerated last week, with large bank loan volumes rising $10.7BN and small bank loan volumes up $3.1BN…

Source: Bloomberg

US equity market cap remains dramatically decoupled from bank reserves at The Fed (which ticked up last week). The last time it was this decoupled did not end well for stocks…

Source: Bloomberg

And finally, as if you needed a reminder after this week’s NYCB debacle – despite the rebound off the lows again this week in regional bank shares, which must mean everything is awesome, right? – the regional bank crisis is still very much alive as evidenced by the red line below (without The Fed’s imminently expiring BTFP facility)…

Source: Bloomberg

…what else are big banks (green line) going to do with all that cash burning a hole in their pockets (although we do note a big cash drop at large banks – which includes NYCB).

As one veteran Fed watcher remarked “this is such a clusterfuck… deposits should be $500BN lower”

Source: Bloomberg

The bottom line is – this looks a lot like a ‘Small Bank’ crisis. The last time this happened, the crisis sparked a sudden $300BN ‘run’ in small bank deposits (this time it’s bigger!).

Is The Fed ‘hoping’ for a controlled bank-run this time – so as many small bank deposits are drained voluntarily, before they are drained all at once in a panic (and the Reverse Repo facility is empty, unable to provide any cushion)?