After well over a year of significant outflows, commercial deposit balance levels stabilized in the second half of 2023. The average bank ended the year down 7%, but many managed to end up flat for the year and some even printed a little growth. What changed?
Three key factors contributed to stabilizing balances. First, strong GDP growth provided an offset to the impact of quantitative tightening on overall money supply. Second, that growth was fueled in part by robust consumer spending, and when individuals spend money, it lands in commercial accounts. And third, the banking-related fears of early 2023 receded, so companies were more willing to place deposits at banks. This helped most banks turn the tide on outflows.
We’re still not out of the woods when it comes to commercial deposit levels. Several complications persist, including headwinds for commercial deposit costs and customer profitability as more back-book deposits reprice and continued rotation from non-interest-bearing to interest-bearing deposits. We’ll explore those themes in future releases of According To The Data.
Weekly Commercial Deposit Balance Flows
The average commercial bank ended 2023 down 7% YoY, but the second half of the year saw a return to stability and even modest balance growth.
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