![]() Next, deposit levels are right where they were at this time two years ago and remain $1.5 trillion or 10% above the bump they got by COVID stimulus in 2020. First, the decline in deposits comes after a massive increase in deposits in 2020 caused by the COVID stimulus funds. The decline in bank deposits should be examined from multiple angles. In the second quarter, this downward trend continued although it slowed for the quarter. In the first quarter of 2023, deposits declined for the first time in the more than five decades of tracking. ![]() The flow of deposits is a leading indicator as to whether the banking sector will be able to meet loan demand, or if the sector will need to engage in outside borrowing to fund new loans. The largest source of funding for banks is deposits. With big banks already reporting earnings and regional banks right around the corner, investors can benefit from understanding how the sector is performing and benchmarking those results against their banks’ earnings report. The significance of this report is that it reflected balances as of Friday, June 30 th, or the end of the second quarter. Last week, the Federal Reserve released its weekly report on the cumulative assets and liabilities of commercial banks in the United States.
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