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Data snack: US banks’ growth rates are down in Q1 2022

  • Growth is stalling across the US banking sector, with both deposits and loans up marginally from the fourth quarter of 2021.
  • This could be an indicator of current macroeconomic conditions, as the Federal Reserve tightens up market conditions so that the economy will moderate.

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Data snack: US banks’ growth rates are down in Q1 2022

U.S. commercial and savings banks reported slower growth on both the deposit and lending sides of their balance sheets in Q1 2022 compared to the previous quarter, according to data compiled by S&P Global

This could be a consequence of current macroeconomic conditions, as policymakers look to slow down the US economy in order to lower inflation. The Consumer Price Index was up 8.5% in March 2022 - its highest level in more than 40 years. And with the Fed rising interest rates, money has become more expensive, making borrowing less appealing. 

In the fourth quarter of 2021, total deposits across the industry as well as loans and leases were up by 3%. Three months later, the metric decreased to around 1%. 

Looking at some of the biggest banks with more than $500 billion in assets, JPMorgan Chase recorded the highest increase in deposits of 3.3% but was also the only one to decrease its loans and leases volume.

Meanwhile, PNC Bank grew its lending portfolio by 1.8% while reducing its deposits by 2%. 

US banks’ credit provisioning has also recorded an increase in the quarter, which can impact bottom line profitability. A provision from credit losses represents an estimation of potential losses that a bank could experience due to credit risk, and is recorded as an expense on a bank’s financial statement.

Credit loss provisions rose for the second consecutive quarter to $4.5 billion after banks experienced negative provisioning in the first three quarters of 2021.

JPMorgan Chase booked the largest provision at $1.34 billion, up $2.55 billion from the previous quarter. Among the large banks that continued to record a negative provision were Wells Fargo and Truist Bank, S&P Global found.

But there are some good signs in the market as well - credit quality remains healthy at US banks, despite the current disheartening macroeconomic factors such as declining labor productivity and accelerating consumer inflation.

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