US Economics_ Bank Balance Sheet – Cash assets rebound

Summary of Key Points from the Conference Call Industry Overview - The document pertains to the US Banking Industry and specifically discusses the cash assets and loan growth trends among commercial banks as of November 11, 2024 [9][23]. Core Insights and Arguments 1. Cash Assets Trends: - Total bank cash assets have been on a declining trend throughout the summer and early fall, with a decrease of approximately $380 billion from early June to early October [9][13]. - Recently, cash assets have rebounded somewhat on a non-seasonally adjusted basis, indicating a potential stabilization or slight increase in the coming months due to limited new Treasury debt issuance [9][13]. 2. Liquidity Position: - Banks continue to maintain ample liquidity, with the effective federal funds rate remaining stable relative to the interest on bank reserves [9][13]. - The ongoing Fed balance sheet runoff has drained some liquidity from bank reserves, but overall liquidity remains sufficient [9][13]. 3. Loan Growth: - Loan growth remains modest, with a reported increase of $22.4 billion in seasonally adjusted terms and $59.0 billion non-seasonally adjusted during the week of October 30 [9][13]. - The growth was primarily driven by commercial and industrial loans, loans to non-depository financial institutions, and consumer loans [9][13]. 4. Deposits: - Deposits have generally increased over the last few months, with a reported increase of $17.5 billion in seasonally adjusted terms during the week of October 30 [9][25]. - Deposits as a share of total liabilities have remained stable in the 83-84% range, similar to pre-pandemic levels [9][25]. 5. Small vs. Large Banks: - Unlike large banks, cash assets have been generally increasing at small banks, indicating a divergence in liquidity management strategies [9][14]. 6. Interest Rate Environment: - The Fed has cut policy rates, but they remain restrictive. Longer-end Treasury yields have increased due to better economic data, which may keep loan growth modest in the near term [9][13]. Additional Important Insights - The document highlights the potential for a pickup in loan growth next year due to lower rates and easing lending standards, alongside reduced election uncertainty [9][13]. - The balance sheet data indicates that large banks' total assets were approximately $13.65 trillion, while small banks' total assets were around $6.77 trillion as of October 30 [9][27]. - The report emphasizes the importance of monitoring the evolving economic conditions and regulatory environment, which could impact the banking sector's performance moving forward [9][44]. This summary encapsulates the key points discussed in the conference call, providing a comprehensive overview of the current state of the US banking industry and its outlook.