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Surging Deposits May Add Costs to Retail Banking, Hilder Says

U.S. banks may be hurt by higher costs as customers balk at investing in the stock market and add to their deposits, said David Hilder, an analyst at Susquehanna Financial Group.

“A lot of people have decided that with any excess cash they might as well put it in the bank, earn some interest, and at least know that it’s safe,” Hilder said today in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “If you can’t turn around and invest those deposits at some sort of spread, it really doesn’t help you.”

A growing deposit base that exceeds the pace of new loans isn’t “a free good” because banks may have to boost payments for things such as Federal Deposit Insurance Corp. assessments, Hilder said. Lenders may struggle to cover those outlays with less profitable lending amid low interest rates, he said.

JPMorgan Chase & Co. (JPM), the biggest U.S. bank by deposits, said last month that deposits swelled to $1.1 trillion in the third quarter, an increase of 21 percent compared with a year earlier. Deposits at Bank of America Corp. (BAC) and Wells Fargo & Co. (WFC) grew by 8 percent each.

“People may think that it doesn’t cost a bank anything to accept deposits, but it does,” Hilder said. “Most of these banks are frankly trying to cope with big inflows in deposits.”

To contact the reporter on this story: Charles Mead in New York at

To contact the editor responsible for this story: David Scheer at

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