That could be an underappreciated growth driver for banks’ profits—and their stocks—especially if interest rates start to rise in 2022.
Whether the Fed raises rates, and the timing of any increases, depends on inflation expectations, jobs growth, and the overall trajectory of the economy. Bank deposits surged to $17 trillion in 2020, a $4 trillion increase from 2019 as consumers built their savings, rather spending during the pandemic. Deposit growth also got a lift from banks’ securities purchases, along with the Fed’s injections of liquidity into the market.
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