Why America will soon see a wave of bank mergers

The trouble facing many of America’s banks is coming into sharp relief. After the failures of Silicon Valley Bank (SVB) and Signature Bank in March, behemoths such as JPMorgan Chase and Bank of America attracted deposits despite paying minimal interest, according to earnings reports released since April 14th. Many small and medium-sized banks, by contrast, face increasing competition for customers and rising funding costs. On April 18th Western Alliance, a lender with $71bn of assets, reported that it had lost 11% of its deposits this year. To tempt deposits back, banks will have to pay more for them; in the meantime many have turned to temporary loans, including from the Federal Reserve, that incur today’s high rates of interest. Yet lots of banks’ assets are low-yielding and cannot be sold without crystallising losses. A big profits squeeze is coming.