Banks are now having to compete for deposits, unlike earlier during the pandemic. Banks are quick to charge borrowers more for products including credit card debt and mortgages in a rising-interest rate environment. But they tend to slow-walk increases in the rate they pay to depositors.

Banks' deposit beta is the percentage of changes in the federal funds rate that banks pass along to depositors. As deposit betas rise, savers are paid more, and banks get to keep less in interest. "The benefit to earnings from increases in interest rates is falling across our coverage universe," wrote Graseck.

The median bank covered by Graseck that disclosed its rate sensitivity saw its estimated EPS benefit from a 50 basis point Fed increase fall by 90 basis points. The biggest drop occurred at Wells Fargo, where the benefit fell by about 6%. JPMorgan and KeyBank may actually be in a position where higher rates could actually reduce interest income.

Rising rate environment has hurt areas of fee income like investment banking and mortgage revenue. A JPMorgan spokesperson declined to comment on the record, but pointed out that the deposit beta disclosures are based on standardized model assumptions that may not happen. Last month, the bank said that it would generate at least $58 billion in net interest income in 2022.

JPMorgan could see up to $400 billion leave the institution, CEO Jamie Dimon said. Those deposits would mainly be of a lower-quality type the bank was not interested in retaining. JPMorgan noted in its second-quarter results that "median deposit balances are down across income segments"
Posted by AL alphaman
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