JPMorgan Chase has a problem: It’s taking in money faster than it can lend it out.
As long as this trend continues, the biggest bank in America by assets will drift further away from a commercial bank’s core social and economic role of lending.
At the end of the third quarter, the bank was lending out just 56 cents for every dollar it had in deposits, according to earnings results released on Tuesday. At JPMorgan, that figure – known as the loan-to-deposit ratio – has been low and falling for years. In 2012, I made a chart showing how the bank’s excess deposits – the value of total deposits minus total loans – had risen after the crisis. That’s money customers have given the bank, but that the bank isn’t lending.
Back then, the bank’s loan-to-deposit ratio was a now rosy-seeming 64 percent. JPMorgan’s excess deposits were growing then on both an absolute and relative basis, and in the past two years they’ve kept on growing.
Here’s an updated version of the chart:
This is a chart showing a bank acting less and less like a bank. Banks take in deposits, lend a large portion of those deposits and buy things like bonds with the money that’s left over.