Earnings reports likely showing over $500 billion in outflow from major lenders raise new questions about the health of the sector. Top US banks have seen significant savings withdrawals following the collapse of three regional lenders, Bloomberg has reported.

• JPMorgan, Citi, Wells Fargo kick off industry reports Friday
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The largest US banks have likely seen over half a trillion dollars in deposit outflow from a year earlier as customers rushed to withdraw their savings following a banking crisis at several regional lenders, Bloomberg reported on Wednesday.

Concerns are mounting about the health of the banking sector ahead of the deposit data that will be unveiled when major US banks report first-quarter earnings. JPMorgan, Citi, and Wells Fargo are slated to kick off earnings season on Friday.  

Banking analysts estimate that JPMorgan, Wells Fargo, and Bank of America have lost $521 billion in deposits over the past year in the sharpest slump in a decade. In the first quarter alone, the drop reached $61 billion as a late influx of cash following a crisis at three US lenders failed to offset the outflow of funds to products offering higher interest rates, the outlet said.  

In early March, massive deposit runs caused two lenders, Silicon Valley Bank and Signature Bank, to fail within days. A third lender, First Republic, ended up being the recipient of a $30-billion rescue from top Wall Street banks in the form of deposits. The big lenders stepped in amid investor fears that First Republic could become the next US bank to fail.  

Bank deposits have been shrinking since the beginning of last year amid high inflation, which eats away at savings, thus encouraging depositors to seek more yield than is being offered by deposits.   

“It had already been a fiercely competitive environment for deposit gathering, and the recent bank failures may turn the deposit knife fight into a metaphorical gun fight,” Wedbush Securities analysts David Chiaverini and Brian Violino wrote in a note.  

The recent upheaval has also sent banking stocks tumbling. The KBW Bank Index, a benchmark index tracking the leading lenders, lost 25% in March alone. Regional banks were the biggest losers last month, with First Republic Bank seeing its shares fall 89%.

Lenders began seeing deposits dwindling as early as the start of last year, as historic levels of inflation ate away at consumers’ savings. Still, they were largely able to keep a lid on deposit costs, with many banks still paying just a few basis points in interest on basic checking accounts.