Investors have punished a handful of US regional banks amid fears the turmoil will ensnare more lenders. But depositors at some — at least for now — appear to be sitting tight.
Take Western Alliance, the Phoenix, Arizona-based bank whose shares tanked as much as 27% on Tuesday, the day after JPMorgan Chase & Co.’s emergency rescue of First Republic Bank. While the deal failed to quell investor concerns the upheaval would spread, depositors were a little less fazed: Between Monday and Tuesday, they added $600 million of cash to the bank.
“The bank has not experienced unusual deposit flows following the sale of First Republic Bank and other recent industry news,” Western Alliance said in a statement, outlining that deposits had increased to $48.8 billion.
The same was true for rival lender PacWest Bancorp., which said it experienced no “out-of-the-ordinary” deposits flows following First Republic’s sale. Through Tuesday, deposits had increased since the end of March, it said.
PacWest surged as much as 88% on Friday following a punishing rout earlier in the week after Bloomberg News reported it was weighing strategic options including a sale. It later confirmed the news in a statement saying it was in discussion with investors.
On Thursday, Western Alliance denied a Financial Times report it was exploring options including a sale, which had also prompted its shares to slide.
The pair likely owe some of their deposit stability to their proportions of insured deposits — or accounts holding less than the $250,000 deposit insurance cap. Insured deposits account for more than 70% of the deposit bases at each, in stark contrast to collapsed Silicon Valley Bank and Signature Bank, where many depositors had millions in their accounts.
That rendered many uninsured — with such deposits accounting for more than 90% at Silicon Valley Bank alone — a setup that exacerbated runs by businesses who desperately needed the cash. The Federal Deposit Insurance Corp. is now seeking a sweeping overhaul of deposit insurance after the recent bank failures, including granting business accounts more coverage.
Deposits have been a closely watched gauge amid the upheaval, where regional banks have been grappling with declines in asset values as customers withdrew money. As they fight to retain depositors, a number expect to earn less from their loan businesses as they spend more to win back customers.
Larger regional banks including Fifth Third and Truist Financial Corp. showed deposit levels largely held steady during the first quarter.
Comerica, a Dallas-based lender, said while total average deposits were $67.8 billion in the first quarter, down from $79.1 billion in the same period a year prior, it had a higher level of deposits relative to pre-pandemic period.
“We successfully protected our core customer relationships as deposit pressure was largely localized to select portfolios,” said Curtis Farmer, the lender’s chief executive officer, in an April 20 statement. “Our business model was tested, and we emerged in a better position for long-term success.”
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