Major United States Lenders including Citibank (NYSE: C), Bank of America (NYSE: BAC) and JP Morgan Chase (NYSE: JPM) are sitting on as much as $1.29 trillion in cash, or about 98 cents for every dollar on existing business loans, according to new data from Bloomberg.
The banks’ ratio of available capital to corporate debt has increased by more than 400% since June 2008 when the capital ratio was 21 cents in cash for every dollar in business loans. During that period, corporate loans also shrank by 14% to $1.32 trillion as bankers tightened lending standards to lower default rates and meet new demands for higher capital ratios by regulators to improve their liquidity.
Banks are leaving more money sitting idle as demand contracts from borrowers and as fears compound that regulators will require additional liquidity to prevent a second financial crisis. These higher levels of cash-on-hand may be cutting into returns by as much as 33% from pre-crisis levels, according to a report from analysts at KBW Inc.
Citigroup currently has $193 billion in cash and deposits as of December 31st, 2009. Citigroup now has $1.15 for each dollar of existing corporate loans, which totaled $167 billion according to data from Bloomberg. Citigroup’s ratio have doubled since June 2008 when cash totaled $113 billion against $222 billion worth of corporate loans at Citigroup, which is the third largest bank in the United States in terms of assets.
JP Morgan Chase ranked second with a capital ratio of $1.08 as of September 2009, when the company made its most recent report of commercial loan totals to the Securities and Exchange Commission.
Bank of America, the largest U.S. Lender, has cash and deposits of $146 billion or 64 cents for each dollar of commercial loans.
