CD Renewals: Managing The Coming Expense Wave

CDs are renewing into an environment with the highest rates in a generation. By January 2024, the rate on more than half of maturing CDs will be 400 basis points or more (Figure 1).  

Curinos’ analysis has consistently shown that attrition is highest for first-time CD renewals compared with those that have renewed at least once. The profitability challenge becomes how best to keep consumers in these CDs at your institution without giving away the house on rate.  

Figure 1: CD Rate At Maturity For First Renewal CDs | 12-17M | Jun '23 - Jun '24 | Branch Banks

Source: Curinos Retail Deposits Analyzer, branch banks | Simple averages displayed

In managing CD renewals, many banking institutions are setting auto-renewal rates on the low side – though not so low that renewing customers feel taken advantage of – while remaining competitive in at least one CD term for acquisition. This allows the institution to harvest margin from auto-renewals while providing rate shoppers with the option of a higher rate at renewal time.  

Another approach is to offer a high top-rate CD requiring new money, which limits cannibalization from internal accounts (Figure 2). Segmenting existing-money retention and new-money acquisition can provide a better marginal cost of funds than having just a single high-priced CD for both.

Figure 2: % New Money VS. Acquisition Over Time | CD | Jun '22 - Jun '23

Source: Curinos Retail Deposit Analyzer | Each dot represents a net average of each month

One thing is clear: Decision-makers at financial institutions need analytics to guide them to the optimal approach for managing their CD renewals, and that requires near-real-time data on customer behavior and competitive activity.    

Introducing Deposit Optimizer Essentials.

Manage your deposits using best-in-class analytics without the expense of a large team. Deposit Optimizer Essentials provides data and executive insights that cut through the noise to offer guidance to achieve your funding goals. 

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