• JPMorgan CEO Jamie Dimon recently issued an alert on the banking sector’s need to keep up with demands for higher rates and avoid further deposit flight.
• According to Federal Reserve Economic Data (FRED), $78 billion exited American bank accounts from July 5th through 12th.
• Banks are feeling the pressure due to higher yielding money market accounts and potential fallout in the commercial real estate sector caused by hybrid work environments.
Deposit Flight From US Banks
In a recent warning, JPMorgan Chase CEO Jamie Dimon alerted shareholders of the banking sector’s need to keep up with demands for higher rates and avoid further deposit flight. According to newly updated stats compiled by the Federal Reserve Economic Data (FRED) system, $78 billion exited American bank accounts from July 5th through the 12th. Banks are feeling increasing pressure due to higher yielding money market accounts and potential fallout in the commercial real estate sector caused by hybrid work environments.
Competing With Money Market Accounts
Banks are feeling pressure to compete with higher yielding money market accounts as they invest significant levels of cash into third party intermediaries to bring in new deposits. Autonomous Research analyst Brian Foran says Dimon’s alert represents a “definite curb your enthusiasm moment” for banks after an industry-wide surge in second-quarter profits.
Impact of Hybrid Work Environments
US banks are also bracing for fallout in the commercial real estate sector fueled by the emergence of remote and hybrid work environments. A recent report from S&P Global Market Intelligence found 576 American banks are overexposed to commercial real estate loans based on regulatory guidelines, which represents an increase of 30% compared to one year ago.
Investment Risk Warnings
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