A number of top banks, including Citigroup, J.P. Morgan Chase and PNC, announced right after the Federal Reserve undertook the fifth rate hike of its cycle that they would be increasing their prime lending rates.
None of them said they were lifting the interest rates they’re paying to depositors.
within minutes of the Fed decision @Chase says it will put up its prime lending rate by the full 0.25pc, effective tomorrow
deposit rates UNCH pic.twitter.com/l7YwwAwbOR
— Ben McLannahan (@bmclannahan) December 13, 2017
That’s not a surprise. Before the Fed’s most recent rate increase, the interest rates paid on a standard, $10,000 minimum, 12-month certificate of deposit averaged just 0.28% in November, having budged just nine basis points since their 2014 lows, according to data from RateWatch.
The deposit rate on a $10,000-minimum money-market account was just 0.09% — all of one basis point higher than the 2014 lows.
Also read: Fed lifts interest rates but sticks to go-slow approach as Yellen era nears end
That’s a period that includes four quarter-point rate hikes from the Fed. Households have over $11 trillion stocked away in checkable, time and saving deposits and money-market funds, according to Fed data through the third quarter.
It’s not always the case that savers are on the losing side. During the financial crisis, banks weren’t reducing what they paid to savers even as the Fed funds rate tumbled, possibly because they were trying to hold on to capital.
That’s not the case now.
In the second quarter, banks earned an aggregate profit of $48.3 billion, according to FDIC data, up 10.7% from a year ago. Just 4.1% of banks reported a loss in the second quarter, according to the FDIC.
Their net interest margin was the strongest in more than three years.