$38.4 Billion Withdrawn from Wells Fargo and Citigroup in One Year as JPMorgan Chase CEO Warns Federal Reserve

In the past year, Citigroup saw a decrease in deposits from $1.3305 trillion at the start of 2023 to $1.3072 trillion in early 2024, losing $23.3 billion.

Wells Fargo experienced a $15.1 billion drop in deposits during the same period, from $1.3567 trillion to $1.3416 trillion.

JPMorgan Chase reported a 7% drop in deposits in its Consumer & Community Banking division for the first quarter of the year, not counting its recent acquisition of First Republic Bank. Excluding First Republic, JPMorgan’s overall deposits remained unchanged.

Looking ahead, JPMorgan’s Chief Financial Officer Jeremy Barnum anticipates deposit levels to stay the same or possibly decrease slightly. He noted, “We expect deposit balances to be sort of flat to modestly down. So that’s a little bit of a headwind at the margin… in a world where we’ve got something like $900 billion of deposits paying effectively zero, relatively small changes in the product-level reprice can change the NII run rate by a lot.”

JPMorgan Chase CEO Jamie Dimon has warned that US banks could face another crisis if the Federal Reserve raises interest rates. In his latest annual shareholder letter, Dimon expressed concern that persistent inflation might force the Fed to tighten monetary policy further, putting banks and leveraged companies at risk.

He reflected on the acquisition of First Republic Bank in May 2023 after the collapses of Silicon Valley Bank and Signature Bank. Dimon stated, “When we purchased First Republic… we thought that the current banking crisis was over. Only these three banks had the toxic combination of extreme interest rate exposure, large unrealized losses in the held-to-maturity (HTM) portfolio, and highly concentrated deposits. Most of the other regional banks did not have these problems. However, we stipulated that the crisis was over provided that interest rates didn’t go up dramatically and we didn’t experience a serious recession.”

Dimon warned that if long-term interest rates rise above 6% accompanied by a recession, it would cause significant stress not only in banks but also among heavily indebted companies. He reminded, “A simple 2 percentage point increase in rates essentially reduced the value of most financial assets by 20%, and certain real estate assets, specifically office real estate, may be worth even less due to the effects of recession and higher vacancies. Also remember that credit spreads tend to widen, sometimes dramatically, in a recession.”