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The Federal Reserve has released data showing a decline in deposits at US commercial banks towards the end of April, dropping to the lowest level in nearly two years. However, overall credit provided by banks has increased, led by a record level of outstanding loans and leases.
After the collapse of Silicon Valley Bank (SVB) and smaller Signature Bank, record deposit outflows were experienced, and deposits had stabilized into early April. They picked up again in the latter half of April, but on a seasonally adjusted basis, deposits have remained relatively unchanged since the end of March.
Although there were expectations of a contraction in total banking system credit due to recent banking system turmoil and aggressive interest rate increases by the Federal Reserve, total banking system credit has yet to show any signs of contraction. In fact, total banking system credit has risen for a second week to $17.37 trillion, led by an increase in loans and leases to a record high of $12.11 trillion.
However, loan growth has flattened out in recent months, with the annual growth rate cooling from a double-digit pace late last year to about 9% as April ended. This suggests that tighter conditions are beginning to temper bank credit.
In conclusion, the recent data released by the Federal Reserve shows a decline in deposits at US commercial banks towards the end of April, while overall credit provided by banks has increased. However, there are expectations of a contraction in total banking system credit due to recent banking system turmoil and aggressive interest rate increases by the Federal Reserve.
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