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Navigating 2024's Tricky Terrain

Welcome to the Curinos Review

Welcome to the Spring 2024 issue of the Curinos Review.

Retail banking fees are again under scrutiny. Our research shows that overdraft and non-sufficient funds fee revenue will continue their steady downward trend, as will credit card late fees and interchange fees. Taken together, this will make profitably serving the mass market even more of a challenge this year, particularly for community banks and credit unions.

M&A may pick up this year, but buyers and sellers alike are going to need an entirely new playbook. For example, in 2017, branches accounted for about 70% of all new retail banking relationships while digital accounted for only 28%. Today, it’s just the opposite. That dramatic change in customer behavior is one of several that need to be weighed in any acquisition.

Our National Home Equity Forecast projects that originations in the first half of 2024 will decelerate by up to 25%, even after a dramatic year-over-year decline in 2023. To help turn the tide, it might be time for HELOC providers to cut back excess line sizes and focus more on growing balances.

These are but a few of the many insights from our Spring issue of Curinos Review.

Lower rates may be on the horizon, but charting a profitable course in today’s environment still presents its share of headwinds, hazards and challenges. That’s why this issue, “Navigating 2024’s Tricky Terrain,” examines some of the knottier issues our clients face and provides actionable ideas for dealing with them.

We explore how personalization and iterative testing by micro-segment can help reveal the optimal strategies for encouraging retention and maintaining margin as rates plateau. We observe that competing effectively for wealth deposits can mean understanding the elasticity of a client’s portfolio and offering selective short-term exceptions as a way to avoid repricing the entire book. We also examine how asset/liability management, funds transfer pricing and the analytic intelligence of deposit behavior are all essential in maintaining a healthy balance sheet.

And while shrinking fees will likely contribute to the mass market’s eroding profitability, our view is that financial institutions should focus on the segment’s true value — it’s a reliable source of low-cost deposits, with the portfolio rate for small balances less than 25 basis points. For home lending, we see opportunities to drive profitability through a more simplified mortgage suite and less generous HELOC lines. Finally, conditions for M&A activity seem to be improving. If you’re shopping, be aware that the market has changed post-pandemic due to higher interest rates, evolving consumer behavior and closer regulatory oversight, so to win, your playbook needs to change as well.

The industry is avidly awaiting the Federal Reserve’s rate-cutting cycle, expected to start in mid-2024. But we caution against being overly optimistic that lower rates will magically melt away banking’s many challenges. Just as the rising rates of this cycle spawned unforeseen developments, so too can softening rates as the cycle shifts downward. That’s why our enduring promise to help you “navigate today, anticipate tomorrow” could be more important than ever.

The trust you’ve placed in us is one of our greatest assets, and we value it highly. Thank you.

Craig Woodward, CEO

It appears that the steady unwinding of retail banking fees will continue to take its toll on bank and credit union profitability. Proposed regulations from the Consumer Financial Protection Bureau affecting overdrafts, non-sufficient funds, late fees and interchange are but the latest development in a trend many years in the making.

March 18, 2024

Mass Market Vs. Mass Affluent: A Data-Driven Primer

Curinos’ latest U.S. Banking Shopper Survey offers insights on how to best meet the needs of the mass market and mass affluent customers by informing the most effective strategies for acquisition and optimal experiences to unlock primacy and improve profitability.
READ TIME: 5 MINS

March 18, 2024

Bank M&A: Forget Much Of What You Think You Know

After a recent lull, banking deals are expected to pick up this year thanks to anticipated rate reductions, higher stock values and healthier balance sheets.
READ TIME: 8 MINS

March 18, 2024

On A High-Rate Plateau, Getting Personal Is Key To Getting Deposits

Today’s high-rate environment is a first for many bankers, and it’s presenting challenges regarding the products they’re offering and how those products are priced.
READ TIME: 7 MINS

March 18, 2024

Thinking Beyond Rate To Get And Keep Wealth Deposits

With the Federal Reserve unlikely to reduce short-term interest rates before summer, banks experiencing significant runoff of wealth deposits and cash sweeps have several options available beyond broad hikes in deposit rates to stop the bleeding and potentially regain share of wallet with their wealthiest clients.
READ TIME: 7 MINS

March 18, 2024

Treasury Needs More And Better Data To Manage Falling Rates

As rates drop and profit compresses, we urge banks to embrace asset/liability management (ALM), funds transfer pricing (FTP) and the analytic intelligence of deposit behavior.
READ TIME: 7 MINS

March 18, 2024

Home-Lending Update: How To Strive Till ’25

Residential real estate lenders across the country are all too happy to put 2023 behind them while also hoping to retire the “Survive till '25” mantra as they look forward to healthier top- and bottom-line growth this year.
READ TIME: 6 MINS

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