ℐ “THE WORLD HAS CHANGED” ARE YOU READY FOR THE DEPOSIT BATTLE ROYALE? By IntraFi In just over a year, banks have gone through a headsnapping change, from being stuffed with cash and worried about having too much liquidity to watching those deposits leave in droves. Core deposits are on the decline, forcing banks to pay up on CDs and savings to try to stem the outflow. With the Federal Reserve expected to continue raising interest rates to combat inflation, deposit pressure is likely to worsen in the months ahead. According to the results of IntraFi’s most recent quarterly survey, 88% of bank executives think deposit competition tightened over the past 12 months, and 84% expect it to get worse in the coming year. To better understand how banks should be thinking about funding, IntraFi recently sat down with Neil Stanley, founder and CEO of The CorePoint, to discuss the battle for deposits, strategies to attract and retain customers, what banks should do if the Federal Reserve continues hiking rates, and more. What follows is our conversation, edited for length and clarity. Are we headed for a recession? All economies go into a recession at some time or another, and the last two we’ve had have been severe. It’s natural to be cautious after such upheaval, but the fear-mongering has been excessive. Bankers should take a hard look at employment data, inflation data, GDP history, and interest rates. I highly recommend looking at the Atlanta Fed’s GDPNow, which forecasts GDP based on real-time statistics. Right now, it’s forecasting 2.5% GDP growth for the first quarter. That’s not stunning, but it doesn’t indicate an economic catastrophe either. The U.S. economy has proved more resilient than its critics would have you believe. How squeezed are banks going to get if the Fed keeps raising rates? We’ve been through a lot, yet net interest margins have pretty much stabilized. Current data from the Uniform Bank Performance Reports compiled for December 2022 show In general, banks that pause to assess the situation, those that use better tools and products than the competition, are going to be much better off. Colorado Banker 12
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