The lopsided distribution of new deposits among various financial institutions during COVID 2020 is almost as jaw-dropping as the size of the deposit inflows since the start of the pandemic. First-half deposit growth was a record-shattering $2.4 trillion, five times the size of the first two quarters of the Great Recession. Even in the third quarter, deposit growth still continued, albeit at a much slower pace.
According to FDIC data, $2 trillion (83%) of the $2.4 trillion in new deposits went to just 13 banks over $250 billion in assets. The preponderance went to three institutions: Chase, Bank of America and Wells Fargo. Collectively, banks below $1 billion in assets actually saw their deposits decline. A similar pattern was seen with credit unions, per NCUA data, according to a new deposit study by Raddon Research.
This deposit imbalance is a portent of trouble to come for community and even midsize institutions in the not-too-distant future, according to Andrew Vahrenkamp, Senior Research Analyst and Program Manager at Raddon Research.
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