US: Sleepy Money Drives Record Bank Profits in Q3


The rise in interest rates is driving bank profitability in a way not seen since before the Global Financial Crisis. Lower provisions have added further to the record figures. Banks’ Net interest margins continue to expand despite competition from money market funds.

Aggregate profits for JPMorgan, Bank of America, Wells Fargo, Citi and Goldman Sachs hit $34 billion in the third quarter of 2023, 17% more than in the same period last year.

JPMorgan Chase, the largest bank in the US achieved record results for Q3 and for the accumulated first 9 months of the year. Wells Fargo is close to its record for the Q3. Bank of America posted a 10% rise in Q3 profits. Citi, Goldman Sachs and Morgan Stanley however have failed to sparkle.

JPMorgan Chase reported $13.2bn profit for Q3 up 35% v. Q3 2022. The collapse of Silicon Valley Bank has actually strengthened JP Morgan Chase via depositor flight from smaller banks and the benefit from its favourable bailout of First Republic.

Bank of America, the second-largest bank has also benefited from the loss of confidence in smaller banks. The bank earned a profit of $7.8 billion, up 11% from Q3 2022. This rise in profits was driven by rising interest rates although unrealised bond losses are an underlying problem.

Even with short term interest rates above 5% the average US savings account is just 0.45% according to The Federal Deposit Insurance Corporation. The average for one-years deposits is just 1.36%. There is $17tn in low-earning US bank deposits, of which $8tn is uninsured, not to mention large current account funds earning 0%.

Corporations should be very concerned about $tn’s trapped in their current and operating bank accounts. Legacy banking systems and legacy bank account structures are inhibiting changes and eating into the profitability of US and global corporations.

It has never been a better time for corporations to carry out a comprehensive review of their banking arrangements. With the right approach they can piggy-back the rise in interest rates and boost profitability.


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