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Americans are spending less and saving more - just don't expect them to keep putting those savings into banks.

Deposits are a measure of a bank's health and ability to grow, particularly when the capital markets as a source of funds dry up, as they did during the financial crisis. Strong deposit growth also helps bank profit margins, because deposits are usually cheaper than other ways to fund loans.

Until recently, bank deposits have grown quickly, as Americans spent less and recoiled from a bear market. But in the first quarter, after several quarters of sharp increases, deposit growth slowed to the slowest rate in more than 10 years.

Less spending and more saving eventually will mean there is less money in the economy, which will dampen rather than increase bank deposits. Aaron Fine, a partner with consulting firm Oliver Wyman, said deposits might soon decline, following the trend of previous recessions: "In the early 1990s recession, deposits actually fell by about 5% over the course of two or three years," he said.

Last year, domestic deposits insured by the Federal Deposit Insurance Corp. rose 7.4%, with particularly strong growth in the last two quarters of 2008. In the fourth quarter alone deposits rose 3.5%, the strongest quarterly increase in ten years.

That was when stocks and bonds fell sharply, and consumers and businesses were concerned about keeping their money safe. With the FDIC expanding its deposit protection, deposits poured into banks, particularly those banks customers perceived as safe - and those willing to pay high rates.

Customers "are more cautious about how they are spending and they are very much looking for safety," putting money into banks, said Donna Goodrich, the deposit servicing manager at BB&T Corp. (BBT) in an interview with Dow Jones Newswires.

SunTrust Banks Inc. (STI) Chief Executive Jim Wells said during his company's first quarter earnings conference call that corporate customers "increased their liquidity" rather than expanding their businesses, "and as a result deposits grew significantly."

But as the markets rebound, deposits compete with other investments. "The markets are beginning to get a bit more sane again. Americans are not losing their love for stocks so easily," Brendan McDonagh, the chief executive of HSBC North America said in a recent conference call with reporters.

In the first quarter, domestic deposits rose only 0.6% from the fourth quarter, to $8.6 trillion. Certificates of deposit fell, particularly big ticket CDs, as did transaction account deposits, while money market and savings account deposits rose slightly. Soon even those deposits might fall.

Banks have been remarkably inconsistent in collecting deposits. "Some of the failure fear is gone," Oliver Wyman's Fine said, and the appearl of higher rates began to attract some depositors.

BB&T, a bank preceived as strong, said deposits from its bank customers rose 9% from the first quarter. SunTrust's deposits rose 6.7% as the bank paid higher rates.

JPMorgan Chase & Co. (JPM), on the other hand, has repeatedly said it is reluctant to pay up for deposits, and let high-interest rate certificates of deposits it acquired with Washington Mutual Inc. run off. It's deposits fell 10%.

Bank of America Corp (BAC) "responded" to more competition for deposits, Chief Executive Ken Lewis said when it released earnings; first quarter deposits rose 8% from the fourth quarter. Despite some negative headlines, BofA was perceived as too big to fail, and Fine said that may have helped.

Marshall & Ilsley Corp.'s (MI) deposits fell almost 4% in the first quarter; CFO Greg Smith said during an earnings call that the Milwaukee bank elected not to chase higher rates offered by competitors.

-By Matthias Rieker, Dow Jones Newswires; 201-938-5936; matthias.rieker@dowjones.com