The four largest U.S. banks in terms of assets, Bank of America (NYSE: BAC), JP Morgan Chase (NYSE: JPM), Citibank (NYSE: C) and Wells Fargo (NYSE: WFC) are, in response to the financial crisis, hoarding more cash than they have in the last 40 years.
Bloomberg recently stated that Citigroup and JPMorgan Chase are holding onto cash reserves “as if another financial crisis were on the way.” Since the failure of bond-giant Lehman Brothers last year, Citibank has almost doubled its cash reserves, and Citibank isn’t alone.
The Wall Street Journal recently published a report stating that those four banks have increased their combined liquidity by 67% to $1.53 trillion as of September 30th compared to $914.2 billion in June of 2008, before the collapse of Lehman Brothers and the onset of the largest financial crisis in modern times. The amount that those banks have liquid is equivalent to 21% of the banks’ total assets, compared to 15% before the financial crisis.
JP Morgan Chase’s total cash holdings of $456 billion have increased to 22% of its total assets, up from 9.5% from before the financial crisis began.
The financial sector is not the only industry that’s hoarding up cash either. The Wall Street Journal recently reported that during the second quarter, the largest 500 non-financial firms held about $994 billion in cash and short-term investments, or about 9.8% of their assets, which is up 7.9% from a year earlier.
WSJ stated that companies have continued to build cash reserves despite the official end of the recession. Of those top 500 companies, 248 have reported their third quarter results, which have increased to 11.1% of its assets. Alcoa, Google, PepsiCo and Texas Instruments were companies that all reported significant increases in their cash holdings.
