Customers today have more places to put their money and can move it more easily, making deposits less predictable, more sensitive to rates, and more expensive to replace. For banks, that raises the question: Which of our deposits are actually core?
Product type, account size, and cost do not provide a complete answer, this article argues. Banks also need to understand which relationships stay through rate cycles and how customers respond to pricing and alternatives. Total deposit growth can hide churn if new deposits are simply replacing balances that left. According to Darling Consulting Group, replacing lost deposit relationships can add roughly 25 to 40 bps in interest expense.
Use DCG’s Deposit Retention Index to compare your bank’s retention with the broader industry and spot changes in customer behavior that may not show up in total balances.
How much of your deposit growth is true growth versus replacement? Have you identified which relationships have remained stable through rate cycles? Does your institution measure core deposits based on how customers actually behave?