USA: JPMorgan and Citi have high demand from new clients – 03/15/2023 – Market
Big US banks are being flooded with requests from customers who want to transfer funds from smaller creditors, while the failure of SVB (Silicon Valley Bank) causes the biggest movement of deposits in more than a decade, according to executives.
JPMorgan Chase, Citigroup and other large financial institutions are trying to cater to customers who want to move deposits quickly by taking extra steps to speed up the normal application or “onboarding” process, according to several people familiar with the matter.
A package of emergency measures released by the US government on Sunday (12), including a new Fed (Federal Reserve) lending facility for banks, appears to have passed its first major test for now, avoiding the failure of a third bank following the implosion of SVB and Signature Bank.
However, account holders still try to transfer balances to larger banks such as JPMorgan, Citi and Bank of America, as well as money market funds, these people said. This occurs especially when balances exceed the limit of US$ 250,000 (R$ 1.3 million) guaranteed by federal insurance.
Transfers of deposits from SVB and other regional lenders to large banks increased last week and continued into Monday (13), the same sources say. “The calls are coming in today like planes getting stuck on a blizzard day at O’Hare Airport,” said one senior banker, referring to Chicago’s bustling air hub.
JPMorgan has shortened wait times to open accounts and is accelerating the speed with which new corporate customers can access funds to ensure they can pay employees later this week, according to a person briefed on the matter.
Several banks redeployed staff to positions related to opening accounts, the people said.
Citi’s private bank, which caters to wealthy individuals, is trying to open accounts within a day of applying, compared with a typical one to two weeks, some sources say. The institution has also started opening accounts and initiating money transfer procedures while the new customer is still undergoing compliance checks.
Executives say they are walking a fine line because they don’t want to be accused of exploiting the situation. JPMorgan has told bankers not to actively try to steal customers from smaller rivals, according to people briefed on the discussions.
JPMorgan, Citi, Bank of America and First Republic declined to comment.
“Goliath is winning,” Wells Fargo banking analyst Mike Mayo said in a research note on Monday, singling out JPMorgan as a beneficiary “in these less certain times.”
Shares in several regional U.S. banks, including San Francisco-based First Republic and Phoenix-based Western Alliance Bank, closed sharply lower on Monday, despite President Joe Biden’s pledge that his government will do “whatever it takes” to protect customers. Share prices of many of these banks partially recovered in after-hours trading.
Large asset managers also reported an influx of cash withdrawn from lenders after a few anxious days for bank customers.
“Flows across the industry have been from banks to money market funds,” said a person familiar with the operations of a large US asset manager. Money market funds are more closely supervised than before the 2008 financial crisis, when some required government intervention.
For some, the SVB crash highlighted the risk of having all your money in one bank. Before regulators stepped in with a promise to guarantee all deposits on Sunday, many corporate customers in the technology and life sciences sector were concerned that they might not be able to pay employees or suppliers.
“Clients are thinking, ‘I’ve learned my lesson, I’m not just diversifying my portfolio, I want to diversify my bank,'” said a private banker at a large firm.
Translated by Luiz Roberto M. Gonçalves