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Deposit costs squeeze profits despite Fed pivot

Hopes that a pause in interest rate hikes would end upward pressure on deposit costs have failed to materialize so far.

And even with Federal Reserve officials signaling a more accommodative stance over simmering trade tensions, bank executives are cautious about the prospect that rate cuts would deliver immediate relief based on historical experience.

In a report in May, the bank analytics and advisory company Novantas said that data it collects on about $3 trillion in deposits show that churn — or the proportion of portfolios switching to higher-rate accounts — jumped in 2018 and has remained elevated. “That churn is a big piece of what drives ongoing” increases in deposit costs despite flat rates, Adam Stockton, a director at Novantas, said in an interview. “That’s customers switching from standard products into promo products, and customers looking to maintain promo rates on an ongoing basis.”

Read the article at S&P Global Market Intelligence

For more information, contact Novantas Marketing

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