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Positioning For Success In 2024

Welcome to the Curinos Review

Welcome to the Winter 2024 issue of the Curinos Review.

The Year of Deposits. That’s how Curinos views 2024 – how to get them and how to keep them at a cost that preserves net interest margin and profitability. For this reason, we’ve dedicated the core of this issue of Curinos Review, “Positioning for Success in 2024,” to strategies for optimizing deposits, and deposits will continue to be the dominant theme in our communication this quarter.

Now that the Federal Reserve has signaled that it expects to cut rates in the coming months, we can all breathe a guarded sigh of relief. That said, deposit interest rates are likely to remain elevated in 2024 – the marginal cost of funds for retail deposits is around 10% entering the year and, in our view, banking institutions have little choice but to pay if they want to grow or even hold steady. We dig deeper into the numbers in our lead article, “Deposits in ’24: It’s Gonna Cost You,” and also offer non-rate strategies that FIs should be putting in place now so they can deepen customer relationships in the longer term.

We also present practical strategies for acquiring deposits from commercial clients and small-business customers, which cost roughly half of retail channel deposits. For FIs with the need and wherewithal to raise a material level of deposits, we examine the pros and cons of buying them through acquisition or building them organically. And we look at branch networks, which remain a critical source of customers and deposits even as transactions go ever more digital. Our analysis shows that a successful branch opening in 2024 largely depends on targeting specific segments of the market, like high net worth or commercial customers – the old “broad brush” approach doesn’t work like it used to.

On the asset side of the balance sheet, 2024 will likely present stiff headwinds. In the mortgage market, we expect issues of affordability, inventory and lack of demand to persist, with a meaningful recovery not arriving until 2025. In the meantime, Curinos’ Home Equity Forecast, the industry’s first, suggests that demand for HE products is poised for an upturn in the second half of 2024 as interest rates decline and consumer optimism rises.

Finally, we look at the white-hot topic of generative AI (GAI) and how it will accelerate in banking. Chatbots are already a staple at most larger institutions and many smaller ones as well, and from here, we see the technology pushing more forcefully into customer acquisition, fraud prevention and enhancing customer lifetime value.

To be sure, the new year will present more than its share of challenges, but those with the creativity, courage and resolve to meet them will be that much more prepared to reap the rewards to come. As ever, Curinos is here to help you “navigate today and anticipate tomorrow” so that the successes you achieve in 2024 will set the stage for a stellar 2025 and beyond.

Craig Woodward, CEO

It wasn’t that long ago that banking institutions were overflowing with cheap deposits, much of that abundance coming in the form of pandemic-era stimulus checks for consumers and businesses. The opposite is true now – banks and credit unions of almost all sizes are desperate to grow deposits at a reasonable price, but there aren’t enough of them out there to go around.

January 10, 2024

Raising Meaningful Deposits In 2024: Buy Or Build?

For financial institutions looking to grow deposits significantly, a key question becomes whether buying them via acquiring another institution would be more advantageous than building them organically.

January 10, 2024

2024: The Year Of The Liquidity Manager

The base case for 2024 is that the economy will continue along a path of moderate growth, inflation will continue to normalize, and the Fed will gradually cut interest rates by 75 basis points over the course of the year while continuing to wind down its balance sheet.

January 10, 2024

More Mortgage Malaise, Higher Hopes For Home Equity

Curinos expects many of today’s mortgage market challenges – affordability, inventory, lack of demand – to persist in 2024, with a material recovery not likely until 2025.

January 10, 2024

Core Deposits Needed: Build Branches Or Close Them?

In the face of rising expense pressure and the continued need for low-cost deposits in a ‘higher-for-longer’ rate environment, all banking institutions in 2024 will struggle with the question of what to do with their branch networks.

January 10, 2024

Realizing The Promise Of Generative AI

In 2024, generative AI (GAI) will accelerate in use for acquiring customers, detecting fraud, reducing compliance costs, boosting customer lifetime value and more.

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