POCKETING GAINS

In business there 's the sage advice always give more than you promise. It's advice that the nation's banks hardly ever follow.

Here is the classic case you see all the time, especially in banking: Promise much more than you give. Most of the big banks particularly those with the most credit card holders screwed up their balance sheets leading into the last recession on their own, only to wheedle and whine for taxpayers via government to ride to their economic rescue.

You'll also notice here, "some big clients."
.wsj.com/articles/j-p-morgan-to-increase-deposit-rates-for-some-big-clients-in-january

Hours after the Fed’s decision earlier this month, the largest U.S. banks announced increases in the prime rate, a reference rate for a variety of loans including credit-card debt. But most banks didn’t make any corresponding hikes to the interest they pay to depositors. The moves signaled that at least for now most banks hoped to pocket the gains from the Fed’s move.

Net interest margins, or the difference between what banks pay for deposits and what they earn on loans and investments, have been squeezed in recent years by low interest rates.

That last part about being squeezed should apply in spades to depositors and their high credit card rates that never really declined proportionately to the drop in interest rates they received on their checking and savings accounts.

“They’re so compressed there’s no question they’ll keep the majority if not all of [the benefits of the first rate hike],” said Lance Pan, director of research at Capital Advisors Group Inc., an investment advisory firm.

J.P. Morgan’s deposit-rate increase will affect most institutional clients and the size of the increases will vary, the person said. They will apply to “operating” deposits, which are deemed stickier and less likely to be withdrawn in a crisis.

Representatives for Bank of America Corp., Wells Fargo & Co. andCitigroup Inc. said there has been no change to deposit rates at the banks. A representative for Goldman Sachs Group Inc. had no immediate comment, while one for Morgan Stanley declined to comment.

The Fed’s decision this month to lift its benchmark interest rate by a quarter percentage point marked the end of an era that had pinched banks’ lending profits. Lenders anticipate that higher rates will provide an immediate boost to lending income, while also possibly helping loan demand.

In a rising rate environment, deposit-rate increases typically lag behind increases in loan rates, which is why banks can make more money when rates go up. Vining Sparks analyst Marty Mosby estimates that large U.S. banks will raise rates on interest-bearing deposits by less than 0.1 percentage point in the wake of the Fed’s move. Meanwhile, the prime lending rate quickly rose to 3.5% from 3.25% after the Fed announcement.

In the brokerage business this would be called front running. In Washington and on Wall Street it known as banking as usual.