What Is The Current Loan-to-Deposit Ratio For The Largest U.S. Banks?
The five largest U.S. banks have loan-to-deposit ratios (LDR) ranging from 57% for JPMorgan Chase to 81% for U.S. Bancorp. JPMorgan’s significantly diversified business model (including a large custody banking division) is primarily responsible for its low LDR figure.
The loan-to-deposit ratio is the ratio of a bank’s total outstanding loans for a period to its total deposit balance over the same period. So an LDR figure of 100% indicates that a bank lends a dollar to customers for every dollar that it brings in as deposits. But this also means that the bank doesn’t have significant cash on hand for contingencies. A combination of prudence and regulatory requirements suggests that for a traditional bank, the LDR should be around 80-90%.
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With a business model that relies heavily on traditional loans-and-deposits services, U.S. Bancorp has an LDR figure that appears to be optimal. As for the other banks, the ratio seems to be inversely proportional to the degree of diversification in the business model – the more diversified the bank in terms of offerings, the lower the LDR figure.
See the links below for more information about the 5 largest U.S. commercial banks:
- How Much In Domestic and Foreign Loans Do The Largest U.S. Banks Hold?
- How Much Of Total U.S. Loans Are Handed Out By The 5 Largest U.S. Banks?
- How Much In Domestic and Foreign Deposits Do The Largest U.S. Banks Hold?
- How Much Of The Total U.S. Deposit Base Is Held By The 5 Largest U.S. Banks?
Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment/ ask questions on the comment section
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to the full Trefis analysis for U.S. Bancorp | Wells Fargo | JPMorgan | Bank of America | Citigroup
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