2024 Deposit Growth May Not Meet Expectations

This Month in Retail Banking

Various surveys among drivers over the years have shown that anywhere from 73% to 88% of them say that their driving skills are above average. We’ve noticed similar self-confidence among financial institutions, if not quite as pronounced. In a recent poll Curinos conducted among banking professionals, 55% said they expected their institution to grow deposits by 1% or more in 2024 almost a third of them estimating a growth rate of 3% or more. But fully 84% of the same respondents said deposit volume for the industry will remain flat (about one-third of respondents) or will experience runoff (more than half) (Figure 1)   

Figure 1: Industry vs Internal Views on Deposit Growth for 2024

Source(s): CBA Webinar Poll 9/21/23, “Creating a Winning Deposit Strategy in 2024”, 80 total participants

While we applaud the can-do optimism, we also believe something’s got to give: clearly, all of the 55% won’t be able to defy the math. Indeed, Curinos expects that the industry at large will experience modest declines in deposit volume for the first part of 2024 before it levels off in the latter part of the year (Figure 2). According to our most realistic forecast, deposit growth won’t resume for the average branch bank until 2025.  

Figure 2: Monthly Average Customer Balance Projection | Total Deposits | Jan ‘19 – Dec ‘24​

Source(s): Curinos Retail Deposit Analyzer, September '23 | Simple averages displayed

Far be it for us to rain on anyone’s parade, but nor do we want to encourage false expectations. If institutions shoot too high in their budgeting, they may miss their targets. And that often means playing the rate card too aggressively in a game of catchup, which could get expensive. Moreover, if our poll results are accurate (they’re within a reasonable margin of error), there could be many others at the table playing the same game, and that could make it even more expensive. 

With banks and credit unions finalizing their budgets for 2024, we offer this word of caution: it’s mathematically impossible for the healthy majority of them to be above average. As they navigate a rate cycle unseen and untested in more than 15 years, they may want to temper their enthusiasm – again, which we applaud! – with an equal measure of realism.    

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