Friday, April 17, 2009

Citi Losing Non-US Deposits

Back in October, Bloomberg reported:

The Federal Deposit Insurance Corp. will temporarily guarantee new senior unsecured debt and fully protect non-interest-bearing deposits at banks in a bid to restore confidence in the financial system.

"All of us are prepared to do whatever it takes, to fix whatever problems arise, and to work with Wall Street and Main Street to unclog the financial system,'' FDIC Chairman Sheila Bair said today during a Treasury news conference.

The program is the latest effort by the FDIC to shore up confidence in the U.S. banking system in the wake of 15 bank failures this year. The $700 billion U.S. financial industry rescue law raises FDIC coverage of bank deposits to $250,000 per customer from $100,000 through 2009.

Looking at the shift in Citi's deposit base over the last year, the added insurance looks very timely as non-interest bearing deposits spiked, helping to offset a portion of the rather large drop in deposits outside of the U.S. (though more than half of the decline outside of the U.S. was due to FX adjustments).

Change in Deposit Base

Cumulative Percent Change in Deposit Base by Type / Region

Source: Citigroup


  1. Is the data adjusted for disposal of foreign subsidiaries?

    Somewhere along the line, they got rid of Citibank Germany, that was quite a sizable asset with lots of German deposits.

  2. I would need an accountant to weigh in to answer that question, but the answer doesn't change the big picture.

    Deposits are the traditional manner in which banks borrow "cheap" (now the cheaper way is via the government buying in at ~60 cents on the dollar).

    Regardless of whether they lost foreign deposits due to the disposal of foreign subsidiaries or not, they lost a significant portion of this funding. In my opinion this may even be worse because if it was due to the disposal of a subsidiary, that money is never coming back.

    Fortunately that was made up by the increase in U.S. deposits... unfortunately if that portion (that was likely deposited due to fear of investing in risk assets) reverses, they may see a decline in that portion as well...