miércoles, 29 de febrero de 2012

miércoles, febrero 29, 2012


HEARD ON THE STREET
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FEBRUARY 29, 2012
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Deposit Tide Keeps Rising at Banks
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By DAVID REILLY



Hot money keeps flowing into U.S. banks.


Deposits continued growing at a brisk pace in the fourth quarter, hitting nearly $10.2 trillion, according to the Federal Deposit Insurance Corp.'s quarterly banking profile, released Tuesday. That is up about 8% year-on year and marks a doubling of deposits over the past 10 years.




But, as the FDIC points out, about 75% of that growth came from flows into noninterest-bearing accounts, typically short-term parking spots for corporate cash. That continues a trend: Noninterest-bearing deposits were up 34% in 2011, compared with 4.9% growth for interest-bearing accounts.
That disparity is important because noninterest-bearing accounts receive unlimited FDIC insurance, as opposed to a $250,000 cap for interest-bearing ones.




The catch is that the unlimited insurance runs out at the end of this year. As a result, the funds could prove flighty, leading banks to mostly invest the deposits in short-term, low-yielding instruments. The issue is more pronounced at bigger banks: The FDIC says the 10 largest banks accounted for 74% of the $190 billion that flowed into these accounts in the fourth quarter.




Fortunately, banks' overall health continues to strengthen: Aggregate profit jumped 23% year-on-year in the fourth quarter. Meanwhile, credit quality continues to improve, although the pace has moderated.




With deposits, though, at 73% of total assets—their highest level since the fourth quarter of 1993—the danger is too much hot money eventually leaves banks feeling cold.

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