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U.S. Bank Deposits Plummet $472 Billion in Q1 Following SVB-SB Bankruptcy

In a startling development for the U.S. banking sector, the Federal Deposit Insurance Corporation (FDIC) has reported a massive decline of $472 billion, equivalent to about 2.5%, in bank deposits during the first quarter of 2023. This drop marks the largest decrease recorded since the FDIC began monitoring such data in 1984 and can be attributed to the bankruptcy of Silicon Valley Bank (SVB) and Signature Bank (SB).

The FDIC report serves as a reflection of the current financial state of the U.S. banking sector, which has been heavily impacted by the collapse of SVB and SB. The bankruptcies of these banks have caused widespread chaos within the sector, including the subsequent bankruptcy and acquisition of First Republic Bank (FRB) by U.S. entities in May.

Upon the release of the FDIC report, the U.S. banking sector index experienced a sharp decline of 2.6%, reaching a two-week low overnight. This single-day drop represents the most severe since early May, with major losses reported by Comerica Bank, Key Corp., and Citizens Financial.

While emphasizing the resilience of the U.S. banking sector, the FDIC chairman acknowledged that the full consequences of the SVB and SB bankruptcies may not be fully evident until the FDIC reports on bank deposits in the second quarter. Furthermore, additional risks loom, including the impact of inflation, rising interest rates, and economic pressures, particularly within the commercial real estate sector.

In the midst of these challenges, the FDIC also noted a modest increase in banking profits. Profits rose by 16.9% to $79.8 billion in the first quarter. However, this figure pales in comparison to the significant impact caused by the bankruptcy of SVB and SB banks.

As the U.S. banking sector braces for further repercussions, market observers and industry experts are closely monitoring the unfolding situation, with the hope that stability will be restored and confidence rebuilt in the coming quarters.

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