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A Message For The C-Suite

Leaders in the financial-services industry will have a lot on their plates in 2023 as they navigate a fragile global economy, rising (and maybe falling) interest rates and scrutiny from regulators.

As a result, Curinos presents this high-level view of the industry as we approach the new year.

Deposits Take Center Stage As Rates Rise
  • Banks are benefiting from loan growth and loan yields, with future performance heavily driven by deposit betas.
  • Credit is the largest unknown for future earnings performance, but prospects are good for a “soft” landing.
  • Fees are less of a factor in affecting performance.
  • Banks with outsized capital markets, M&A advisory, real estate or wealth businesses have been the most affected by the economy.
  • The most significant pandemic hangover is the embedded losses in the securities book (where excess deposits were parked).
  • The industry is challenged by new digital-transformation issues:
    • Digital marketing and experience investments have fallen short of anticipated benefits.
    • Banks need to rethink digital relationship primacy and personalization.
    • Branches need a “third wave” of reconfiguration.
    • Regionals and community banks find it difficult to keep up with the costs and capabilities.

Banks need to navigate deposit costs and improve the effectiveness of digital investment.

For 2023, a three-part agenda: manage deposit costs, monitor credit risk and make improvements in digital effectiveness.

Navigate Today

Today’s Priorities

  • Manage funding composition and cost:
    • Back book rate-sensitive money
    • Wealth and commercial deposits
    • Revisit TM pricing
  • Expand lending selectively:
    • Target relationship customers (in particular, for home equity and commercial)
  • Develop a liquidity strategy and manage unrealized losses in the securities portfolio

Today’s Headwinds

  • Hints of credit issues (auto)
  • Overconcentration in capital markets, real estate or large-dollar (wealth) depositors.
Anticipate The Future

Tomorrow’s Priorities

  • Improve the quality/effectiveness of digital acquisition and onboarding.
  • Deepen the support for digital customer management:
    • MarTech stack partnering strategy (build vs. buy)
    • Seamless integration of online and digital
    • Metrics and incentives for primacy and relationship
  • Focus on relationship primacy and personalized/tailored products.
  • Rethink “third wave” of branch reductions and branch personnel roles.
  • Consider M&A to gain core deposits and scale.

Tomorrow’s Challenges

  • Expense/effectiveness of digitalization and partners
  • Cost of talent and role of branch personnel
  • Want to go further?

    Contact us to learn more about how Curinos can help you navigate today and prepare for tomorrow.