- The falling rate cycle that started a year ago has had starts and stops and started again with this September and October rate cuts.
- Return to normalcy has been delayed due to the macro impact of trade and immigration policies, and 2026 deposit growth could vary widely.
- To win, banks must be prepared for multiple scenarios and have intelligent pricing and targeted-customer strategies to optimize cost and drive growth.
The Fed’s September and October rate cuts have reignited hopes of a prolonged easing cycle similar to Q4 2024, with one more cut expected in December and one each in 2026 and 2027. We’re in a higher-for-longer environment with a terminal rate targeted to be higher than the peak of the last rate cycle of 2019. For nine months after Q4 2024, however, rates stayed flat and growth slowed, forcing some banks to cut rates then raise them at an elevated cost. Consumer and small business betas lagged, while wealth and commercial betas surged.
This September, we observed a “replay” – a short surge in consumers locking in CD rates and, through mid-October, saw around 40% of providers reducing CD rates. To complicate things further, a month-long government shutdown was starting to negatively affect some households and regions. The challenge for FIs now lies in determining their pricing and growth strategy in an even more uncertain environment.
Banks are finalizing their 2026 plans, even as industry growth projections for Q4 2025 and for 2026 come down. The return to “normal growth” we expected in 2025 has shifted to 2026 and beyond.
Against this backdrop, the critical question for financial institutions becomes: Do you have an intelligent “deposits operating system” to separate signal from noise and a playbook of customer strategies to act decisively to optimize deposit costs and drive growth?
Why It Matters
- ROTCE is 3.3x for top quartile banks vs. bottom quartile by deposit cost (Figure 1)
- Big range in 2026 outcomes vs. baseline plan: For an average $10B deposits bank, growth could be -$140mm to +$280mm and interest expense +$10mm to -$21mm, respectively (Our negative growth scenario is coupled with increase in rates, and positive growth with falling rates.)
- For a $10B deposits bank:
- Every 1 bp of savings generates net interest income of $80k / month and has an estimated 8 bp improvement to ROTCE
- Every 1 pp incremental annual growth generates $125k / month and has an estimated 12 bp improvement to ROTCE
Client Performance Impact
Benefits of Improved Deposit Margins or Growth
Improvement in deposit… | Metric | Monthly Net Interest Income Impact per $10B in Deposits | ROTCE Impact |
Margin | Per 1 bp | +$83k per month | +8 bp |
Growth | Per 1 bp | +$125k per month | + 12 bp |
Key assumptions: Margin on incremental deposits = 150 bp; marginal tax rate = 20%; TCE = 10% of deposits
Figure 1: Average Deposit Cost by ROTCE Performance Quartiles | Q2 ‘25
Source: Curinos analysis of public regulatory reporting data
Deposit Industry Trends & Outlook
Growth remains challenging and expensive across all lines of business (Figure 2). Modest gains are expected in 2026, but they will remain below normal growth. Even as acquisition rates have fallen, banks have struggled to bring down portfolio rates meaningfully (Figure 3). Balance churn has created headwinds. Both cost and beta across lines of business have been in a wide range – low for small businesses and high for large corporates. The macroeconomic environment remains volatile and could drive widely divergent deposit-growth and interest-expense outcomes across business segments (Figure 4).
Figure 2: Average Deposit Growth YTD 2025 – Industry-Level
Source(s): Curinos Analyzer | Note(s): *Wealth data is preliminary
Figure 3: Average Industry Rates Paid – Sept. ’25 – Industry Level
Source(s): Curinos Consumer Deposit & Small Business Analyzer | Note(s): *Wealth data is preliminary
Figure 4: Deposits Drivers and Macroeconomic Scenarios
Source(s): Curinos Analysis
Consumer Deposits: Modest Optimism for 2026
Growth in 2025 has hovered between -2% and +3% across banks, with traditional banks near flat, at -0.4%. Direct banks growth and “money in motion” has slowed, and new accounts have halved over the past year, skewing toward price-sensitive, large-balance accounts. Marketing efficiency is increasing in importance as aggregator-driven accounts decline in quality even as acquisition costs rise.
The outlook for next year is modestly optimistic. Industry growth is projected to be between 0% and 6%, with traditional banks in the range of -2% to 4%. The overall deposit mix will remain stable, with CDs remaining at over 20% of balances in traditional and direct banks.
Key priorities and tactics: CD retention and pricing strategies will remain important. Banks will need to surgically price for acquiring and deepening customer relationships, and they’ll need be able to track money flows and distinguish new money from internal churn. When repricing for margin, they’ll need to leverage price elasticity by segment to mitigate attrition risk and analyze total impact including cost of reacquisition. Mass affluent/affluent segments will require a different strategy vs. mass market. The former are more apt to be rate-seekers, the latter more transactional.
Small Business Deposits: Pick-up Expected
Deposits from small businesses have finally turned positive this year, growing 1.2%, with a pick-up expected in 2026 to 1-6%, but they remain far below historical norms. Pandemic stimulus, rapid rate hikes and inflation have left scars, and borrowing remains tepid. Retail sales have provided some buoyancy, but customer acquisition remains difficult even as business births and deaths have stabilized. Banks, nonetheless, are doubling down on these deposits.
Key priorities and tactics: Manage pricing down while investing in primacy. Offer the right products and value propositions by industry and size segment. All small businesses, for example, need simple, easy-to-use payments to run their business. Proactively shift the go-to-market model from one centered on the branch and lending to one emphasizing the relationship banker, deposits and payments. To acquire more of them, digital, product and marketing are increasingly critical.
Commercial Deposits: Continuing Migration to Interest-Bearing
Gains in the second quarter offset earlier declines this year, leaving commercial deposits flat year to date. But the momentum, however, modest is expected to continue into 2026, at 1-6%. The continuous remixing from non-interest-bearing to interest-bearing products has complicated cost-of-funds management and shows no signs of reversing. Acquisition costs have climbed across products despite easing portfolio rates, and churn is meaningful. Clients remain sensitive to value and are willing to switch.
Key priorities and tactics: To optimize funding costs and liquidity, banks need to have systematic governance and KPIs that include relationship profitability, and they need to exit unprofitable relationships (Figure 5). They also will need to win operating relationships with treasury management because as rates fall, non-interest income will be even more important to preserve profitability.
Figure 5: Deposit Governance
Wealth Deposits: Falling Rates Mean Runoff
In the falling rate cycle, checking runoff has led to this year’s steep decline in wealth deposits, although it’s been slower than during the periods of rising and high-flat rates. In Q2, interest-bearing checking fell because of tax outflows. The CD runoff that had started when yields dropped below 5% continued, because CDs have become less attractive than money funds and other market returns. As wealth customers continue to seek yield, cash sweeps have grown as they’ve become a point of differentiation for some FIs while rates for alternatives remain near floor. Sweeps as a percentage of AUM are increasing as convergence occurs between sweeps, deposits and money funds. And primacy matters: Clients with quality checking accounts (>$3K in balances) have 50% higher balances than clients without checking, and more than 3x higher balances than lower-quality checking clients, those not used for everyday banking (Figure 6).
Key priorities and tactics: To win in wealth deposits, banks must focus on getting the everyday bank account, then on having a slate of higher-yielding options to win the whole wallet.
Figure 6: Average Wealth Total Client Deposits by Checking Relationship* | June ‘25
Source(s): Curinos Deposit Optimizer, Curinos Wealth Deposit Analyzer | Note(s): Simple averages displayed | Page displays all data available at time of production and bank consortium may differ from that of Wealth Deposit Analyzer tool | Quality Checking defined as Wealth client having at least $3000 in Checking balances | *Client must have non-zero balances in Savings and/or CDs
Five Overarching Strategic Imperatives for 2026
- Scenario planning: Model for multiple macro scenarios and the relative mix of growth by product and segment. All deposit growth is not equal – growing consumer more slowly than commercial or wealth could compress the NIM for a bank and cause investor angst. The same could happen if all the growth is skewed to larger-balance affluent customers. Driving the right mix of growth intentionally is key to success.
- Agile and intelligent pricing: Leverage market pricing intelligence including deep analysis of portfolio, market pricing, and strategies and governance grounded in strong data and analytics regardless of rate trajectory. Understand portfolio composition and customer dynamics by segment. Analyze past rate-cycle pricing and growth actions and outcomes, and implications for future scenarios. Balance pricing for acquisition versus retention. Employ a wide range of pricing capabilities to optimize price and growth, evaluate and invest in closing the gaps, and be ready to act when the winds turn.
- Targeted customer strategies: Focus on targeted customer acquisition (new to bank) and total relationship value (deepening) by tailoring strategies by product, segment and geography. Given the wide variability in customer segment preferences and propensity, the ability to monitor customer behaviors and act on them in real time with actionable decision intelligence will give banks a huge leg up.
- Product and marketing flywheel: Optimize marketing in three areas. 1. Analyze marketing and deposit cost together to acquire, retain and grow deposits, which can lead to more cost-efficient growth vs. unidimensional assessments based on rate or marketing, 2. Enhance direct marketing with personalization to improve ROI. 3. Create product and value proposition to increase distinctiveness and align marketing.
- Operational readiness: Prepare levers that are ready to pull, pivot if needed, and act decisively.
Bottom Line
During uncertainty, speed of actions powered by decision intelligence wins. Banks that build agile and intelligent pricing, marketing and portfolio strategies today will secure sustainable growth and profitability tomorrow. And those with the right deposits operating system will emerge as organic growth leaders with the greatest long-term enterprise value.
Against this backdrop, the critical question for financial institutions becomes: Do you have an intelligent “deposits operating system” to separate signal from noise and a playbook of customer strategies to act decisively to optimize deposit costs and drive growth?
Decision & Action Takeaways
Decision to be Made | How to build a deposits operating system and playbook of customer strategies to act decisively to optimize deposit costs and drive growth in an uncertain environment. |
How It Affects Total Customer Value | Deposit costs are a significant driver of bank enterprise value, with ROTCE 3.3x higher for top-quartile vs. bottom-quartile performance banks by deposit cost. |
Action Recipes |
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Guardrails | Monitor deposit growth and/or deposit costs and betas relative to peers and determine when action must be taken to improve relative performance. |
Expected KPI Lift
| For a $10B deposit bank: 1 bp of better margin can save $80k per month, or 1 bp better growth can generate $125k per month. |
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