Profitability: Answering The Challenge

Welcome to the Curinos Review

Welcome to the Fall 2023 issue of the Curinos Review.

No one needs to be reminded that profits at many traditional banks are under intense pressure. But while unfavorable lending performance drove many past downturns, the current challenges are emanating from the liability side of the balance sheet. Acquiring and retaining deposits at a time when betas are being pushed ever higher is weighing heavily on the bottom line, and this trend will likely continue for some time to come.

That’s why our lead article in this edition of Curinos Review, Profitability: Answering the Challenge, is titled “More than Ever, Deposits are the Key to Profitability.” Financial institutions face stiff competition from new entrants unencumbered by the costs of maintaining physical locations and repricing a large back book. Meanwhile, even if the Fed’s rate setting reaches a plateau, Curinos estimates rates on deposits will continue to rise and deposit growth will be below average until the end of 2024.

In keeping with our promise to help you “navigate today, anticipate tomorrow,” this Curinos Review responds to today’s challenge with information that is both timely and actionable. We examine the coming surge of CD rollovers and offer strategies that can be put in place to manage them. We look at the value of having a data-driven deposit playbook and preview key elements it can contain to help chart a profitable path forward. In addition, we outline short-term actions for limiting back-book repricing and pricing exceptions and highlight longer-term strategies for investing in new-customer growth.

On the asset side, we describe several ways to use data to unlock profits in what we think will be an improving mortgage-lending market. We also reinforce why we continue to be bullish on small business, where both sides of the balance sheet can combine to foster stickier low-cost deposits, enduring relationships, and solid profitability. Finally, we explain how reducing account-opening friction for the 45 million U.S. consumers now underserved by financial institutions could be a sizable source of future profits.

The upside of these challenging times is that they can push banks to innovate and, in doing so, to realize untapped potential. We’re here to help you realize yours, as together we pursue greater performance and financial success in the coming months.

Craig Woodward, CEO

U.S. bank deposits dropped by nearly $500 billion year over year in Q1 2023, according to the FDIC – the largest decrease since the early 1980s. On top of that, deposit betas are rising as customers are waking up to the prospect of higher yields.

September 21, 2023

Higher Rates Push Banks To Draft A CD Maturity Playbook

In 2020, with interest rates in freefall during the pandemic and the Federal Reserve committed to accommodative policy, demand for CDs evaporated.

September 21, 2023

The Moat You Thought You Had? It’s Been Breached

Pandemic. Near-zero rates. Surge deposits. Those were the days. The realm was secure from interlopers – or so it seemed.

September 21, 2023

Small Businesses Offer A Clear Profitability Upside For Banks

On average, financial institutions spend about half as much to acquire small business deposits than consumer deposits. And small businesses that have a lending relationship with a bank keep far higher deposit balances than those without the lending connection.

September 21, 2023

Data, Discipline And Technology Can Unlock Mortgage Lending’s Potential

Today’s high interest rates are taking too much of the blame for depressed home sales.

September 21, 2023

Breaking Down Barriers To Reach A Wider Set Of Customers

An estimated 45 million U.S. consumers are credit invisible, have thin credit files or lack a recent credit history.

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