Deposit growth at banking giant JPMorgan Chase is slowing because customers are taking out money and stashing it in accounts at other banks that have higher interest rates, according to a report by Reuters.
Even though the U.S. Federal Reserve has set current interests rates at between 2.25 and 2.5 percent, many big banks in the U.S haven’t risen the rates they pay on deposits and savings.
Because of this, smaller and online-only banks are taking advantage of some customer dissatisfaction with the system and paying customers between 2 and 2.45 percent interest.
JPMorgan Chase Co-President and Chief Operating Officer Gordon Smith said the customer actions are slowing deposit growth for the bank, but that most of the customers will still keep Chase as their main banking institution.
“People are taking a component of their deposits. They’re parking those deposits with a high-yield competitor, whomever they may be,” said Smith, who also heads JPMorgan’s consumer and community banking. “That money is very liquid. It’ll then move from that high-yield competitor to another … but that high-yield competitor is not winning the primary bank relationship, which is obviously what’s critical.”
Smith said customers want more than just attractive interest rates from a bank, and that JPMorgan is always reviewing deposit pricing.
In other JPMorgan news, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said European banks should look beyond their borders for mergers to take advantage of the full economic power of the region.
“If politicians fight it, they’ll be sub-scale forever, and that’s not good for their economy,” Dimon said in March. “They should really think through the choices here and allow these banks to merge and go pan-European.”
Saying there is “some truth” to the notion that Europe is overbanked, Dimon put the blame for that on the European Union and its regulations for slowing the consolidation of financial institutions.
“These banks need to merge to have the kind of scale, diversification,” Dimon said, “but it’s hard to do if you don’t finish regulations like the single regulatory mechanism, the insurance mechanism.”
Germany currently has two banks that are informally considering a merger: Deutsche Bank AG and Commerzbank AG. The European Central Bank would prefer a cross-border combo that would let Deutsche push integration into the area’s markets, but some German officials would rather have a national banking giant.