The worst may be over for U.S. banks, with liquidity fears that led to the recent failures of three regional institutions subsiding, but banks also face a longer-term challenge — a reversal of the flow of cash into noninterest-bearing transaction accounts during years of government and Federal-Reserve stimulus before and during the COVID-19 pandemic.David... The worst may be over for U.S.
Based on the numbers above, here are year-over-year changes for the group’s noninterest-bearing deposits over the past four years through March 31: A decline in noninterest-bearing deposits and possible outflow of other deposits as savers seek higher yields tempered banks’ advantages from rising interest income on new or adjustable loans as interest rates rose over the past year. A bank’s net interest margin is its average yield on loans and securities investments less its average cost for deposits and wholesale borrowings. But NIM isn’t a GAAP calculation; banks don’t use a uniform method to calculate it.
Konrad wrote: “We currently expect noninterest-bearing deposits to shrink [as a] percentage of total deposits to pre-COVID levels .” But he acknowledged that this “may not be the best baseline” because interest rates in 2019 were lower than they are today and because “it has never been easier for customers to move money.”