S&P Global - Are You Overpaying for Deposits?

I’ll have to find it but some big IB firm just posted a top 10 of the lowest and highest cost of funds in Texas. Lows ranged from .01 to 10bp. Highs were 1.8% for an online bank down to about 1.35%. Our COF have dropped by half while having 22% deposit growth. Somewhere in my college economics class we talked about elasticity of demand. Didn’t know we were talking about deposits. 😀

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Original Message:
Sent: 12/2/2020 4:52:00 PM
From: Barb Rehm
Subject: S&P Global - Are You Overpaying for Deposits?

I was surprised to read in this week's complimentary post from S&P Global's Market Intelligence that some banks are getting their cost of funds below 10 basis points while others continue to pay more than 25 basis points, especially on commercial deposits. "Commercial deposits have grown by about 40% at the industry level this year," a Novantas analyst is quoted saying. "There is not a need for banks to have these deposits, and so we don't think they should be paying for them." The story has great charts and lots of insights for bankers weighing deposit pricing. It also envisions retail deposits increasing by $1 trillion next year.

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Barb Rehm
Senior Managing Director
IntraFi Network
Arlington VA
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