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Banks May Have Turned The Tide On Commercial Outflows

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.​
Commercial Analyzer
Source: Curinos Analyzer Weekly Data. Indexed to 1/6/2023.​

July 23, 2024

CPAs Continue To Soar

Thanks to the unrelenting high-rate environment and the demand financial institutions are exhibiting for new relationships, the cost to acquire (CPA) new-to-bank customers and members has shot up to $663 – a more than 125% increase from pre-pandemic levels.
READ TIME: 1 MIN

July 18, 2024

Profitable Commercial Growth Can Hinge On The Right Client Mix

Many commercial-banking relationships that had been profitable are now under water driven by sustained higher rate environment that has changed client behavior toward deposits and put continuing pressure on spreads. What to do?
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July 16, 2024

Mass Affluent: Big Opportunity, But At A Cost

Mass affluent customers are desirable. They have steady incomes and larger deposits, and they can be cross-sold into other profitable services such as lending and wealth management. But in today’s high rate environment, these more sophisticated clients are also demanding significantly more on rate than their mass market counterparts, so holding on to them is more costly than in the past.
READ TIME: 1 MIN

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