U.S. banks have available a record surplus of $1,770 billion, resulting from the difference between deposits and loans which is growing at the fastest pace in two years, so this year have doubled purchases of Treasury securities. Portfolios of banks’ deposits increased by 3.3% to $8,880 billion within the two months ended July 31, while loans rose 0.7% to $7,110 billion, according the Federal Reserve (Fed) data, reported Bloomberg. The difference between bank deposits and loans increased by 15% since the end of May, the fastest advance recorded in a similar period after July 2010.
Banks this year bought Treasury bonds and other government bonds worth $136.4 billion, an amount more than twice higher than the $62.6 billion amount for the year 2011, as total holdings reached a record $1,840 billion. Faced with slowing U.S. growth, with unemployment over 8% in the last three years and the requirement to hold more quality assets, banks grant loans under the level recorded before the recession.
“Bank deposits continue to have explosive growth, and banks continue to buy Treasury bonds, while the economic growth and inflation slowed down, the crisis in Europe is hanging over our heads, and political uncertainties prevail,” said Michael Mata, fund manager at ING Investment Management Americas in Atlanta.
Total holdings of Treasury securities at U.S. banks reached $500 billion, the highest level since June 2011, even though the difference between interest rates and inflation, for 10-year titles, is only 0.38%, from 1.26% in the previous decade. On the other hand, the five largest U.S. banks had the worst semester in four years. JP Morgan, Bank of America, Citigroup, Goldman Sachs and Morgan Stanley have had in the first quarter revenues of $161 billion, down 4.5% from the same period in 2011 and the lowest level after $135 billion in 2008. Banks have attributed the decline to the low level of interest rates and the negative evolution of trading operations.
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