In our latest update on the industry’s retail deposit rate movements, we observe continued rate cuts across various banks, alongside a notable shift in deposit flows turning negative. This analysis provides a detailed overview of recent trends affecting large banks, regional banks, and online banks.

Deposit Rate Changes

Large and Regional Banks

Over the past month, large banks and regional banks have implemented reductions in their certificate of deposit (CD) rates. Notably:

• C reduced 1-year CD rates by 32 basis points (bps).
• MTB cut 1-year CD rates by 2bps.

Large-cap banks have reduced their 1-year, 2-year, and 5-year CD rates by 64bps, 57bps, and 56bps on average, respectively. Since the trough in Q3 2021, these rates have seen cumulative increases of 12%, 11%, and 11%, respectively. However, savings, checking, and money market deposit cumulative betas remain within the 0-1% range.

Regional banks have experienced a more significant increase in average deposit betas, with cumulative increases of 128bps for 1-year CDs, 62bps for 2-year CDs, and 69bps for 5-year CDs, translating to 24%, 12%, and 13% cumulative betas, respectively.

Online Banks

Online banks have also adjusted their rates, primarily focusing on CDs. Over the past month:

• ALLY reduced savings and money market rates by 5bps and 2-year CD rates by 25bps.
• AXP reduced savings by 5bps and 1-year CD rates by 25bps.
• COF reduced savings, 1-year CD rates by 10bps, and 2-year CD rates by 20bps.

Online banks have demonstrated higher betas in this cycle, with 56% for savings and 71% for CDs, indicating a more responsive adjustment to market conditions compared to their large and regional counterparts.

Credit Unions

Credit unions have maintained stable rates over the past month, showing less volatility in their deposit offerings compared to other financial institutions.

Deposit Flows Turn Negative

In a notable shift, industry deposit flows were negative over the past month, decreasing by 1.4%. The total US banking system saw deposit outflows of $251 billion, driven primarily by outflows of $272 billion (-1.8%) from CDs. Large domestic banks experienced significant outflows of $226 billion (-2.1%), while foreign banks saw inflows of $51 billion (+2.1%).

As the industry continues to navigate economic uncertainties and varying market conditions, these adjustments in deposit rates and the shift in deposit flows highlight the dynamic nature of the financial landscape. Investors and consumers should closely monitor these trends, particularly in anticipation of future economic data releases and central bank policy decisions.