Our updated banking sector chart book is available here, three conclusions:
1) Data covering the week SVB failed suggests that roughly half of the deposit outflow from small banks went into large banks, see the first chart below. The other half probably went into higher-yielding investments, including money market funds.
2) Deposits in the banking sector have declined by almost $600bn since the Fed began to raise interest rates, the biggest banking sector deposit outflow on record, see the second chart below.
3) Capital markets have remained essentially closed since SVB went under, and the longer the current stresses persist, the more harmful it will be for the economy.
The bottom line: The near-term risks to banks combined with uncertainty about deposit outflows, bank funding costs, asset price turbulence, and regulatory issues, all argue for tighter lending conditions and slower bank credit growth over the coming quarters. The economy continues to move from no landing to a hard landing, driven by the lagged effects of Fed hikes, magnified by the adverse effects of the ongoing banking crisis.
Source: Federal Reserve Board, Haver Analytics, Apollo Chief Economist.Source: Federal Reserve Board, Haver Analytics, Apollo Chief Economist. Note: March data as of 15th March 2023. Peak is defined as the month before monthly outflows turn negative.Source: Pitchbook LCD, S&P Capital IQ, Bloomberg, Apollo Chief Economist.
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