US Banks race Interest Rates to keep customers' deposits
In the wake of the banking crisis, many banks have raised interest rates on savings deposits to retain customers, with interest rates rising even faster on deposit accounts that are designed to hold deposits for longer periods of time.
Several regional banks in the US, including M&T Bank Corp., U.S.Bancorp, and Citizens Financial Group Inc., will soon release their first-quarter results, which are likely to offer hints on the health of the financial system and the broader economy. In the wake of the banking crisis, many banks have raised interest rates on savings deposits to retain customers, with interest rates rising even faster on deposit accounts that are designed to hold deposits for longer periods of time.
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Online savings accounts and certificates of deposit now offer an average yield of 3.75% and nearly 4.75% annually, respectively. Even the biggest banks in America are offering higher interest rates to retain customers, with JPMorgan Chase & Co. recording a 49% increase in net interest income to a record $20.71 billion in the first quarter of 2023.
However, smaller banks may find it difficult to raise yields as they may be forced to replace low-interest deposits with higher-interest loans from the Fed's discount window, which is an emergency facility created by the central bank to help banks meet withdrawal demands. Despite the pressures, some mid-sized banks have started to feel the need to raise yields to compete with larger banks for new customers.
Overall, the banking industry in the US may struggle in the coming months to retain depositors, especially amid rising interest rates and a growing preference for higher yields. It remains to be seen how the banking industry in the US will navigate the ongoing turmoil and emerge stronger.
US Banks race Interest Rates to keep customers\' deposits
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