Bank earnings season kicked off today with Wells Fargo’s announcement, and since I have nothing really to say about Wells Fargo earnings I figured the least I could do was put up some charts instead. Not on earnings – they’re up! net interest margin is down! on balance, gnash your teeth a little! – but on what Wells Fargo is doing with all the money it’s got.
This seems like a popular question to ponder, since it’s got rather a lot of money. So today brings the Journal‘s vividly headlined “Wads of Cash Squeeze Bank Margins”, and earlier we had Frank Partnoy and Jesse Eisinger’s attempt to find out where Wells is hiding all its fraud. The main thing is:
- Banks have lots of deposits because everybody’s scared of everything so they put their money in the bank.1
- Banks aren’t making lots of loans for some reason, with the reason ranging from “banks are a bunch of scumbags” to “you’re all a bunch of deadbeats.”
- So they have money left over.
- So they put it somewhere.
A natural question is “where is the somewhere?” and here is where Wells puts it:
That’s just various bits as a percentage of total deposits. You can see loans have decreased as a percentage of deposits since the crisis; other risky-type assets – trading assets and available-for-sale corporate and mortgage bonds, etc. – have increased a bit but not enough to make up for that drop: Read more »