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Curinos Perspective: Reducing Consumer Deposit Interest Expense – 5 Takeaways

From the Curinos webinar, “5 Strategies For Reducing Consumer Deposit Interest Expense, on November 9, 2023. The webinar featured Brad Resnick, director, retail deposits and Ray Montague, vice president, retail deposits.  

Curinos believes deposit volumes will remain flat in 2024 and won’t grow appreciably until 2025, which runs counter to the views of many in the industry. If correct, that means any growth that an institution achieves next year will have to come from someone else, which makes decisions based on data-driven analytics more essential than ever.  

Here are five strategies derived from timely, actionable data that can help FIs maximize already-strained budgets to buck the trend and grow their book. 

1. Embrace the new deposit terrain.  

Retail deposits have run off consistently for more than a year as Fed rates remain elevated, and rate divergence from the front to the back book has expanded enormously. The first wave of higher-rate term maturities is underway, with more than 70% of term balances maturing for the first time. Rates will likely continue to rise even after the tightening cycle ends, so more than ever, a clear-eyed understanding of market dynamics is essential.  

We expect upward momentum on pricing when the Fed plateaus—during the prior cycle, the industry saw over 15bp increase in total portfolio expense

Portfolio Rate Movement in the Fed Plateau | Sep ’18 – Sep ’19​

Source: Curinos Retail Deposit Analyzer | Note(s): Simple average used to protect participant anonymity. All products include interest and non-interest checking.

2. Develop go-to-market strategies. 

A good strategy starts with trustworthy market data. That means data that is: 

  • Timely: Available shortly after week- and month-end to ensure actionable responses before conditions change. 
  • Accurate: Data needs to be validated at the account level to enable apples-to-apples comparisons.    
  • Granular: Many offers may look the same, but beneath the surface they aren’t. Details such as relationship requirements, product features and restrictions matter. 
  • Provided by a trusted partner: Data in an actionable structure is good. Having the guidance to deploy it most effectively is great. 

3. Optimize pricing and products.  

For community banks and credit unions, benchmarking is no longer just a nicetohave. Account-level data – fully validated, not self-reported – is essential for effectively managing deposit portfolios in today’s dynamic rate environment and against competitors that are basing their decisions on near-real-time data. Deposit interest rates are changing as much as 20 basis points per month, so for data to be actionable, it must be put to work quickly  

Community banks and credit unions need access to analytics to manage their book efficiently

Representative Client Dashboard

4. Manage term maturities, possibly 2024’s biggest risk.

Managing the coming wave of CD renewals will be one of next year’s biggest challenges to risk management, and it isn’t just a one-time bubble. Renewal pricing will be a profit-influencing issue to be reckoned with for the foreseeable future. The overwhelming majority of those renewing CDs will be doing so either for the first time or since the last rate cycle. That means they’re much more likely than repeat renewers to shop for rate rather than automatically renewing.

The first wave of higher-rate term maturities is starting with over 70% of term balances maturing for the first time; retention performance will drive 2024 risk

Term Maturities: First vs. Prior Renewal​
Source: Curinos Analysis, Curinos Retail Deposit Analyzer | Simple average used to protect participant anonymity

5. Hone your competitive edge.  

A great way to hone your competitive edge, and your efficiency, is to understand your customers’ level of rate indifference. Half of them might be highly sensitive to rate, but as many as a third may not care about rate because they’re loyal to the institution. The distribution of posted rates in a market generally diverges widely from rates that end up being booked. Better understanding the “area of indifference” can help institutions pay no more than what they need to.  

Is a fair posted rate going to drive new acquisition? Booked rates confirm the answer on what customers/members require.

Savings/MMA Posted Rate % Mix​
Savings/MMA Booked Rate % Mix

Source: Curinos Posted rate database, Curinos Consumer Deposit Analyzer

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