- After light year-to-date (YTD) growth in weekly cumulative total deposit balance growth in September 2022 (.5 percent), that same measure was at -3.6 percent in September 2023.
- Checking balance growth slid from -.8 percent in September 2022 to -10.5 percent in September 2023.
- Growth in other accounts—savings and money market deposit accounts—also fell from 1.7 percent in 2022 to -10.5 percent in 2023.
- A bright spot in the deposit landscape is cumulative CD balance growth, which soared from -.7 percent to 111 percent from September 2022 to September 2023. The trend is evident across all banking peer groups ranging from large and super regional banks to regional and direct banks, as consumers responded to aggressive pricing and sought high return rates. Unfortunately, strong CD balance growth has not been enough to offset checking and savings/MMDA balance outflows.
The narrative is similar on the small business side. Negative growth is the headline, largely fueled by declining growth in checking balances as businesses have begun to burn down cash reserves.
- After being up 7.3 percent YTD in September 2022, total YTD commercial deposit growth dipped to -1.2 percent in September 2023. While a lift is expected in October and November, we anticipate a return to negative growth in December.
- Weekly cumulative checking deposit account growth tumbled from a recent high of 7.4 percent in September 2022 to -2.0 percent a year later.
- Money market deposit accounts also experienced declining growth, down from 9 percent in September 2022 to -4.9 percent this September.
- Meanwhile, CD deposit growth mirrored the consumer market, roaring back from -16.5 percent in September 2022 to 275 percent in September 2023. In fact, this trend significantly offset negative growth on the checking side, but it wasn’t enough to push total deposit growth into positive territory.
Trend 2: Expect a shift in balance mix. In terms of market equilibrium, today’s mix of deposit account balances is notably out of sync reflected by steady declines in checking, a slight leveling off in savings and money market account balances, and more than double growth in IRAs and CDs.
To illustrate the shifts, we plotted three periods: January 2023; September 2023; and 2023 projected, as seen below.
These shifts are driven, in part, by excess checking balances following the pandemic when consumer spending was suppressed. Higher balances are also still seen in savings and money market accounts. Until deposit checking accounts level off to normal balances, runoff and negative growth is expected to continue.
Another factor is the rapid rate increases by the Federal Reserve—a total of 11 since March 2022 with potentially one more expected by the end of 2023. Until these rate increases slow or plateau, the balance mix will continue to shift in response.
Trend 3: Deposit loss varies by region. To dig deeper and analyze deposit growth on a geographic level, we broke out our data by state and rolled it up into regional views. What we see is that the areas experiencing the largest declines in checking, savings, and money market balance growth lead the country in total negative deposit balance growth. Despite rising IRA and CD deposit balances, those lifts were not enough to offset the negative growth in total deposits.
Also, areas where large banks are well represented tend to see larger growth in checking, savings, and money market deposit accounts.
As noted in the chart below, the areas with the largest dips in total deposit growth are:
- West South Central (-9 percent)
- New England (-8 percent)
- East North Central (-8 percent)
Trend 4: Positive growth will return. To help financial services leaders better understand when they can expect a return to normal balance build rates (i.e., positive growth), we tracked deposit balance growth for three periods in time: pre-pandemic, pandemic, and post-pandemic. We then plotted a line for each period to show what that balance growth would look like if it continued, as seen in the chart below.
Where the three lines intersect is when we expect to hit a breakeven point and return to normal overall growth. This should happen next year, in mid-2024.
Looking ahead, we project that:
- 2023 will close with negative growth at -7.8 percent.
- 2024 will remain negative but will recover to -2.5 percent growth.
- 2025 is when banks can expect a return to positive deposit balance growth for consumer and small business accounts.
Building better go-forward strategies.
Financial services leaders can use these benchmarks to validate their performance against the larger market, intelligently adjust their current deposit account strategies, uncover new opportunities, and inform their go-forward approach to deposit account growth.
A deeper analysis from me and my colleague, fellow BAI research director Isio Nelson, along with additional views of deposit growth based on dollar amounts, bank peer groups, and more are available in the recorded September 20, 2023, webinar presentation.
The original State of the U.S. Deposits Market webinar presented in May 2023 is also available to view on demand.
For more information on BAI benchmarking visit: https://www.bai.org/research-and-benchmarking/
