U.S. Bank Deposits Resilient in 1Q23 – Deposit Betas Accelerate

This commentary reviews bank deposits following the banking turmoil experienced in March.

Key highlights include:
•While deposit flows appear to have stabilized, the deposits mix is evolving as deposits are moving into higher yielding alternatives, including CDs and money market accounts.
•Deposit betas, which had been significantly lagging interest rate increases during this cycle, have accelerated and funding costs are expected to move materially higher.
•Net interest income (NII) has shown some weakening this quarter although NII largely remains significantly higher than 1Q22.

“While there has been a range of outcomes, overall deposit levels have been resilient at most banks even though deposits are largely lower since YE2022. Federal Reserve data indicates that for the top 25 largest domestically chartered commercial banks, deposits declined by 2.3% from YE2022 to the end of the quarter.” said John Mackerey, Senior Vice President - Global FIG