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Growing Deposits Is Getting More Expensive Across The Board

The price for new deposits keeps climbing for banking institutions – especially for those dependent on consumer accounts – as high interest rates and pitched competition continue to reprice back books across the industry. We expect this trend to continue well into 2024. 

The latest numbers from the Curinos Deposit Analyzers show the average marginal cost of funds (mCOF) for new consumer deposits exceeding 11% at the end of 2023 (see chart), up nearly a full percentage point from two months earlier. Wealth mCOF saw an even sharper spike, while the average cost for small business and commercial deposits each rose roughly 20 basis points between October and December. 

At these mCOFs, a bank and credit union needs a well-thought-out reason for wanting to grow expensive deposits, and those moving forward need an innovative, data-driven deposit pricing strategy so they don’t pay any more than they have to.    

For more on mCOF trends, see my article “Deposits in 2024: It’s Gonna Cost You” in the latest Curinos Review. 

12-Month Marginal Cost of Funds by Business Line​

Consumer mCOF rose close to 100 bp between October and December​ in the face of aggressive competition for deposits and back-book repricing

Source(s): Curinos Retail Deposit Analyzer, Jan ‘23 | Note(s): 12-month mCOF calculated from deposits acquired from Jan ‘23 – Dec ‘23

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