JPMorgan Will Raise Big Client Deposit Rates

In the wake of rising rates — the shot across the bow that came mid-month as the Federal Reserve pushed through a 25 basis point increase — JPMorgan Chase is following suit.

As The Wall Street Journal reported Monday (Dec. 28), the banking giant will boost deposit rates for a number of larger clients beginning in the new year, and that target date comes courtesy of an unnamed person cited by the publication as being “familiar with the matter.” That would place the shift to higher rates on the depositor base by JPMorgan as among the first of the larger players in the sector.

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As has been widely reported, the Fed decision that came on Dec. 16 was followed up in short order with announcements from other lenders that they would boost their prime rate charges, which tends to stretch across a pantheon of loans that includes, most visibly, credit card debt. That did not come with an attendant boost in depositor rate charges. But by boosting rates on both sides of the book, so to speak, the net interest margin, which stands as a rough measure of the bottom line, would be more compressed than would be seen in the scenario wherein just the prime rate had been maneuvered higher. However, the lagging effect of the deposit rate increases typically means that there is money still to be made in an increasing rate environment and one that has just begun.

Historically speaking, the NIM, as it has been known in shorthand, has been compressed by low rates that have been in effect for years.

The increase that comes on the deposits for JPMorgan will come for most of the company’s institutional clients, with some variations in the increases themselves, and are being limited to what are defined as operational deposits. Retail clients will be spared.