U.S. banks are ‘swimming in money’ as deposits increase by $2 trillion amid the coronavirus

It’s the banking everybody’s version of the rich getting richer.

A record $2 trillion surge in cash hit the deposit accounts of U.S. banks since the coronavirus cardinal struck the U.S. in January, according to FDIC data.

The wall of money flowing into banks has no precedent in history: in April alone, stores grew by $865 billion, more than the previous record for an entire year.

The gains were all driven, in one way or another, by the effect to the pandemic: The government unleashed hundreds of billions of dollars to bolster small businesses and individuals via stimulus checks and unemployment allowances. The Federal Reserve began a barrage of efforts to support financial markets, including an unlimited bond buying program. And an unforeseeable future prompted decision makers, from two-person households to global corporations, to horde cash.

More than two-thirds of the leave behinds went to the 25 biggest institutions, according to the FDIC. And that was concentrated at the very top of the industry: JPMorgan Chase, Bank of America and Citigroup, the biggest U.S. banks by assets, ripened much faster than the rest of the industry in the first quarter, according to company data.

“Any way you look at it, this vegetation has been absolutely extraordinary,” said Brian Foran, an analyst at Autonomous Research. “Banks are flooded with scratch, they’re like Scrooge McDuck swimming in money.”

There are several reasons why the American megabanks — survivors of the decisive crisis in 2008 — were the main beneficiaries of the deposits bonanza. When states began instituting shutdowns in Parade, corporations including Boeing and Ford immediately drew tens of billions of dollars from lines of credit, and that bundle was initially parked at the banks making those loans.

Big banks also serviced a large chunk of customers in the Paycheck Shield Program, the government’s $660 billion effort to prop up small businesses. Since lenders mostly catered to be presenting customers, the money first landed in bank accounts of the firms that facilitated the loans.

Institutions known as give banks, which are custodians for the investments of asset managers like BlackRock or Fidelity, gained deposits when the Fed restraints buying program snapped up billions of dollars of mortgage backed securities. JPMorgan and Citigroup have large protection divisions.

And of course, the megabanks simply have the most U.S. retail customers; ordinary people with few options to fritter away money while sheltering at home. The personal savings rate hit a record 33% in April, the U.S. Bureau of Economic Breakdown said last month. Personal income actually climbed 10.5% that month, thanks to $1,200 stimulus obstructions and unemployment benefits that totaled more than a worker’s regular income in some cases.

All that boodle flowed into bank accounts. Bank of America CEO Brian Moynihan told CNBC last month that kick the bucket accounts below $5,000 in balances actually had up to 40% more money in them than before the pandemic.

Megabanks, with their coast-to-coast networks of spin-offs, have relied on plentiful deposits as a key advantage in the post-financial crisis era. They are one of the cheapest sources of funding for loans, ration the industry mint record profits even in a time of low interest rates.

But banks, which will be cautious imparting money in the midst of a recession, are running out of uses for their growing mountain of cash, according to Foran.

“A lot of banks are saying, `There’s frankly not much we can do with it convenient now’,” he said. “They have more deposits than they know what to do with.”

If the deposit prosperity is merely one sign of the steps taken to blunt the financial harm from the pandemic, it remains to be seen what the basic consequences are for the government’s historic spending binge. Some experts see a collapse in the dollar coupled with higher inflation. Others see a offer market bubble in the making.

One consequence for savers will be more immediate, says Foran: Banks are sure to debase their already paltry interest rates, since they don’t need more of your money.

With contributions from CNBC’s Nate Rattner.