After 2023, a year plagued by significant runoff in Wealth deposits, 2024 has seen nominal growth of 2.45% through the end of September versus -16.7% for the same period last year (see chart). But while Q4 ’23 then saw a striking rebound of 8.26%, it’s highly unlikely that we can expect similar growth, if any, in the final three months of this year. To fully understand why, it’s important to understand what’s been driving the growth in the first place.Â
First, the higher-for-longer rate environment has spawned record levels of exception pricing so far this year across Wealth portfolios. Second, even as the Fed held its rates, Wealth savings and CD rates continued to rise, a lag effect that is often the case in the early stages of declining market rates. But even though these attractive rates have driven improvement to performance, it’s been almost entirely through an influx of volume into existing accounts (augmentation) rather than increased acquisition or reduced attrition (see chart). (At the same time, runoff from these existing accounts (diminishment) has remained relatively unchanged year-over-year.)  Â
After substantial runoff in 2023, Wealth deposits are likely
to return to more normal modest growth for the year.​
Now, with the Fed having dropped rates by 75 bp this year with one more cut likely this quarter, firms are looking to get some interest-expense relief. Wealth savings/MMS portfolio balances priced above 500 bp were just 5.2% of total volume in September, versus 10% just three months earlier and 12.4% at the end of 2023. This metric is worth watching because it will indicate whether Wealth clients will be more likely to bring their extra cash to deposits rather than to money market mutual funds or treasuries. Â
Most likely scenario? As rates subside and the year winds down, look for continued slow and steady growth or lower growth rather than the outlier growth we saw toward the end of last year.Â
