United States banks holding onto more cash

[DougBale]

Good news for the ATM operators as more US citizens are using and holding cash.

U.S. banks are holding onto larger stockpiles of cash due to uncertain economic conditions, including deposit outflows and potentially stronger liquidity rules. This is also in reaction to the failure of multiple banks this year, including Silicon Valley Bank, Signature Bank and First Republic, according to a report by Reuters.

In addition to these banking failures, the S&P cut credit ratings last month, which further impacted the industry. The Federal Deposit Insurance Corp. is also considering a variety of proposals that would require regional banks with more than $100 billion in assets to have more funds on hand to offset losses and to have plans in place for easier dissolutions in the event of a collapse.

Banks in the U.S. had $3.26 trillion in cash as of Aug. 23, up by 5.4% from the end of 2022. Analysts point out that banks need these cash reserves to handle customer withdraws and offset risks caused by loan losses due to the Federal Reserve's high interest rates.

"A lot of banks are taking steps to reduce risk and strengthen their balance sheets," Brendan Browne, S&P's senior credit analyst for financial institutions, said in the report.

Some regional banks are taking earning assets and shifting them into cash or short term securities. Some banks such as JPMorgan are then selling those securities.

"The good news is for some of these banks re-investing cash is that we have pretty high short-term rates," Mac Sykes, portfolio manager at Gabelli Funds, said in the release. "It's definitely opportunistic and advantageous to be investing short-term securities."

This shows that cash is still King and ATM operators will thrive!