Rob,
The challenge bankers have is that the marginal revenue for funds has moved up to 5.33% (Effective Fed Funds). It would seem like a good situation on the surface. Profit maximization occurs when marginal revenue = marginal cost. So, for competitors that are not desperately trying to protect their existing book of funding they are very happy to provide depositors rates that seem insane to most bankers. That is why all of these avenues, and more are now available to depositors:
- High Yield Business Bank Account | QuickBooks (intuit.com)
- Crescent | Welcome to high interest business banking
- Stocks, Bonds, Crypto, & Options Investing App - Public.com
- Log In - TreasuryDirect
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Neil Stanley
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Original Message:
Sent: 04-22-2024 14:32
From: Rob Blackwell
Subject: Tuesday Topic: 'Higher for Longer' Deposit Strategies
With the labor market strong, GDP growing, and inflation stuck between 3% and 4%, the odds of Fed rate cuts are decreasing with each passing week. Some think the days of abundant, low-cost deposits may be gone for good. "I do think this is going to be the new normal," Neil Stanley, PI member and CEO of The CorePoint, recently told Bank Director. "The motivation to lower rates just doesn't seem apparent to me." He goes on to explain how "balance builder" products and other practices can help banks preserve and grow their deposit bases.
Another article from Independent Banker discusses the aggregate drop in commercial bank deposits as more customers shift into higher-yielding alternatives. It highlights several strategies for banks to grow deposits, including expanding into new markets and hosting "block parties."
What do you think-are today's funding pressures temporary or the new normal? How is your institution preparing for the possibility of higher-for-longer deposit costs?
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Rob Blackwell
Chief Content Officer and Head of External Affairs
IntraFi
Arlington, VA
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