JPMorgan Chase, the nation’s largest bank by assets, was lending out just 56 cents for every dollar in deposits by the end of the third quarter, according to earnings out Tuesday.
That key figure, known as the loan-to-deposit ratio, has been low and falling for years. And that means the biggest U.S. bank is lending less based on this widely-recognized measure.
In 2012, writes Ben Walsh for the Huffington Post, the value of the bank’s total deposits, less total loans, had risen after the financial crisis. In plain words, that’s the money Chase customers had given the bank, although the bank is not lending it out.
At that time, Chase’s loan-to-deposit ratio was 64 percent. JPMorgan’s excess deposits have been growing steadily by any measure.
Banks accept deposits, and then lend a large portion of those deposits. With what’s left over, they buy bonds and invest in other instruments.
Now look at JPMorgan’s competitors, Walsh writes: Citigroup’s loan-to-deposit ratio is 67 percent. Wells Fargo’s is 76 percent. Bank of America’s is 80 percent.
“The scale of what JPMorgan’s isn’t lending is staggering: The total value of Bank of America, Citigroup, and Wells Fargo’s combined excess deposits is $766 billion,” says Walsh. “JPMorgan alone has $590 billion in excess deposits. JP Morgan has more excess deposits than any two of its three major competitors combined.”