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A Preview Of The Coming CD Renewal Surge

This Month in Retail Banking

The first few waves of the approaching tsunami of CD maturities have splashed ashore, and they signal that retention is holding up. Even among the highest-rate maturing CDs, branch banks are retaining 87% of their balances, and among CDs with lower rates, retention is even higher (Figure 1).  

Figure 1: CD Roll Metrics by Maturity Rate | All Terms | Branch Banks | Sep ‘23​

Source: Curinos Consumer Deposit Analyzer | Note(s): All terms included | Simple averages displayed | Rate buckets <5% of total portfolio excluded in banks​

Not surprisingly, switching within these institutions – presumably to a higher rate – is prevalent, with almost half of all maturing balances above 150 basis points switching in September. But at the same time, maturing balances below 150 bp (42% of all maturities) auto-renewed at a rate of nearly 60%.   

Perhaps just as heartening is that the average rate increase to switching balances was 1.80% in September, significantly down from a high of 3.10% in May. This drop includes some movement to lower rates altogether, primarily into liquid deposits.    

But it’s still early, and a month’s worth of data does not a trend necessarily make. In the coming six months, nearly 60% of current CD balances are expected to mature, with almost half of that amount maturing in January and February alone. Even if the Fed maintains its current interest rate plateau, we are quick to remind our clients that deposit acquisition costs are likely to remain elevated as the back book moves to the front book. The coming CD renewal surge isn’t a bubble – it will be a challenge throughout the year as banks continue to price CDs competitively across all terms. 

Also noteworthy is that branch banks are hardly monolithic in their performance. While their average deposit volume has declined this year by a modest 1.4%, dispersion among institutions has been significant and widening, driven primarily by how they’ve managed CD renewals.  

As the 2024 tidal wave looms, it’s clear that honing an overall CD strategy and monitoring its effectiveness will become more important than at any time in the last 15 years. 

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