As we witness the changing landscape of banking, Jamie Dimon, the Chairman and CEO of JPMorgan Chase, made a strong point last week: Given changing Fed policies, the chasing of retail banking deposits will become more competitive, leading to less deposits for small banks to lend against. As a result, Dimon urges smaller banks—those under $50 billion in holdings—to consider merging for economies of scale, the ability to serve larger markets, and to profit from greater branding power. By making the right mergers (staying under $50 billion in assets) they would be better able to compete for retail deposits.

 

Jamie Dimon Has a Point

 

Dimon stated that the largest U.S. banks have the capital and marketing dollars they need to capture the majority of retail deposits, the most lucrative deposits a bank can hold.

This whole trend is precisely what we have been saying over the last three years: There will be a continual consolidation of banks, with smaller banks merging and with fewer bank branches out in the marketplace.

As this trend continues, we believe banks will have less appetite for public deposits, leading to a greater search of alternative liquidity investments like U.S. Treasuries and other government-secured bonds.

At three+one, we can help public entities and Higher Ed institutions like yours navigate through banking’s ever-changing landscape. We can help you make your deposits look more attractive to banks of all sizes. In addition, we can place a time horizon on all operating and non-operating cash, which will allow you, your bank, and/or your Register Investment Advisor(s) to maximize the value of your cash, without jeopardizing any legal, safety, and liquidity requirements.

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