Inflation Weighs on Nation’s Largest Banks
How has inflation impacted major US banks?
Inflation has impacted major US banks by causing overall deposits to fall and forcing them to increase interest rates on checking and savings accounts. While higher interest rates help lenders by allowing wider potential profit on loans, they also deter customers from taking on new debt, a big source of revenue for banks. This has led to a decline in net interest income and loan demand from businesses for banks like Wells Fargo.
Which banks reported a drop in overall deposits?
JPMorgan Chase and Wells Fargo reported a drop in overall deposits in their recent earnings releases. This comes as inflation continues to impact the economy and major banks have to deal with high interest rates, which can deter customers from taking on new debt.
Why did banks increase interest rates on accounts?
Banks increased interest rates on accounts due to the Federal Reserve raising rates, as part of its efforts to combat inflation. When the Federal Reserve raises the federal funds rate, it affects the interest rates of banking products like savings accounts. This leads to banks offering higher yields on savings accounts to attract new customers and keep up with the competition.