After more than a decade in which deposit funding had largely been taken for granted, the deposit battle is now on.
Core deposits are once again taking center stage as a critical strategic challenge for virtually all financial institutions, and growing core deposits is not going to be easy. Most institutions have felt the need for core funding at exactly the same time, resulting in a rapid increase in rates and ramp up of marketing and sales activities. Even for seasoned bankers, it’s been so long since the deposit growth “muscle” has been exercised that it likely needs to be rehabilitated. Finally, consumers and media have changed considerably since the last cycle, so strategies that worked in the past are not necessarily going to be as effective this time around.
Now is the time to get a lot more focused on core deposits.
A Deposit Growth Sprint
Despite being in a low-rate environment for years, there are FIs that have grown core deposits and households at a more rapid rate than the industry on average. While every institution is different in terms of its customer segments, geography, and strategy, many core deposit best practices will be applicable.
We are seeing an approach emerge in the past year that has proven beneficial for many banks. It consists of clarifying your internal situation and agreeing on your funding goals, looking outward for best practices and benchmarks, screening the ideas for strategic fit and highest payoff, then project managing for rapid deployment. This approach is both fast and cost-effective.
A Deposit Growth Sprint consists of three sequential steps.
- Scope the Opportunity –Before gathering a team, it’s critical to understand your situation both externally and internally. How have your local competitors performed? What have the top performers done that the others have not? Nationally, who are the core deposit standouts and what strategies and tactics did they rely on? What kind of deposit volumes should you expect from Consumer, Small Business, and Commercial segments? How have analytics and digital marketing played a role in deposit growth for top performers?
Internally, how have you performed compared to these local and national leaders? What has your funding strategy been, and how does it need to change over the next few years? What, if anything, have you done that has worked and what can you learn from that?
- Set the Deposit Funding Strategy – Now it’s time to gather your team for a Deposit Summit. Create and distribute briefing materials from Step One above and key questions to be discussed in advance – so the team can be ready with ideas at the outset. Begin with a discussion of your current funding strategy and performance. Create a “burning platform” by outlining the funding gap that has appeared and will worsen in the near future. Lay out the negative repercussions for each line of business if this situation is not rectified. Then begin to discuss growth opportunities and review the best practices to stimulate discussion.
Finally, evaluate the ideas for strategic fit and payoff. Discuss at a high level whether the organization has the capacity and expertise to develop and implement them, and how quickly.
Don’t leave the room until the prioritized initiatives each have an owner, and you have an agreed upon timeline to get back together with action plans.
Who should this brainstorming group include? Most banks limit it to a small group of senior executives and managers representing all lines of business and sales forces. However, we have seen a very successful case where the CEO brought together every single manager who would be involved in implementing the plans to allow them to prioritize the projects and gain buy-in. This reduced the need for communication after the meeting, increased the feeling of ownership, and permitted more rapid deployment.
- Take Action – Immediately following the group session, each initiative owner creates a team to define the initiative, more fully size the opportunity and cost, and create detailed action plans and timelines. A project management structure is put in place, with regular progress reports provided to executive management during development and following execution of each of the initiatives.
The Time to Adopt New Capabilities and Priorities for Deposit Growth is NOW.
While competition has already begun heating up in some markets, it’s early days in the battle for deposits. Now is the perfect time to get your team together to map out and implement a core deposit growth plan, before you are playing catch-up with your local and national competitors.
Take Action!
Getting started is as easy as assembling your business line and production leaders in a room. CPG does the rest. Call or email Mary Beth Sullivan at 202-422-5261 and ramp up core deposit growth within 30 days.
