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  • Writer's pictureJoe Kennerson

2023 Outlook for Deposits: Three Action Items


2023 Outlook for Deposits: Three Action Items

ALCO | Interest Rates | Deposits



Here’s the reality of the current state of the deposit environment. If you thought Q4 2022 was challenging in terms of rate increases and deposit attrition, it’s likely that the first half of 2023 is going to be even more difficult. The ability to lag deposit pricing is clearly over and retaining balances, let alone growing new funds, will be a challenge.


In fact, DCG’s Deposits360°® non-maturity deposit forecasting model suggests that if the Fed raises rates to 5% in Q1 of 2023, we could see roughly a 45-50bp increase in total non-maturity deposit costs (inclusive of non-interest bearing checking). Adding to the pressure, DCG’s corresponding balance forecast suggests that non-maturity deposits will shrink roughly 5% in that scenario.


The deposit pressures come amidst a banking environment with tighter liquidity levels, higher wholesale funds, and the cost of raising funds at the margin at levels we have not seen in a long time. It’s no mystery why deposit management is at the forefront of every pricing and ALCO/Board meeting.


Here are three action items to consider for institutions seeking to outperfo