WSJ on Smaller Banks' Shrinkage
The Wall Street Journal writes, "Smaller Banks Look to Shrink Their Way Back to Health." It states, "Regional banks have shelled out more and more to depositors to get them to stick around. For many, that still hasn't been enough. After an ugly third quarter, banks rolled out plans last week to try to shrink themselves back to health. Profits dropped by double digits from a year earlier at a number of them, including 44% at KeyCorp, 32% at Citizens Financial and 28% at Truist Financial. KeyCorp said it would become a “smaller, simpler company.” PNC Financial disclosed that it would lay off thousands of employees. Truist, which sold its student loan portfolio this summer, said it would downsize other books with lower returns. Citizens recently said that it would exit the auto loan business and continue to scale back its mortgage business." The piece also says, "Investors are getting nervous. Citizens shares slid nearly 6% on Wednesday after it reported earnings, and U.S. Bancorp shares were down more than 4%. Shares of Zions Bancorp sank almost 10% on Thursday. Regions Financial slid more than 12% on Friday. Megabanks have also had to pay more for deposits, but so far it hasn't been nearly as painful for them. JPMorgan Chase, Bank of America, Wells Fargo and Citigroup collectively earned about $30 billion in the third quarter, a 27% increase from a year earlier.... The banks say it could be worse. They are still making money, just much less of it. Many said their deposit levels were more stable in the third quarter, at least compared with the chaotic first quarter when a string of bank failures led many customers to flee for the perceived safety of the megabanks. Banks paid peanuts for deposits for a long time, including in recent years when customers had tons of extra cash from the pandemic. Now they have to compete with Treasurys and other investments that can yield 5%, or else find other ways to fund themselves."
