Defending Your Deposit Base

Guest commentary prepared by Brian Cox, CFA with Detalus Advisors

Brian Cox, Detalus AdvisorsAs bankers focus on growing their deposits, they may neglect one important item — defending their current deposit base. The fact is the cost of acquiring new depositors is always greater than the cost to retain your existing depositors. To help you stave off any attempts to steal your current customers away, practice these three tried-and-true defensive moves. 

  1. Know thyself — and your competition.
    As part of your ongoing deposit strategy, conduct a quarterly SWOT analysis of your deposit operations and products. SWOT stands for “strengths, weaknesses, opportunities and threats.” Through the analyses, you can learn how your user experience is and if your depositors are happy. You also should learn if you have lost customers and what your rates are relative to your competitors. By identifying your weaknesses, not only can you develop strategies to counter a competitor’s attempt to expose those weaknesses, you also can work to remedy them.

    A key component in this exercise is an honest comparison of your institution to your true competitors. Checking a local rate survey and the bank across the street is not sufficient. The marketplace is no longer local. No geographical borders mean that everyone is a competitor, including fintech companies such as Wealthfront and Robinhood. Choose to ignore digital threats, and your bank will struggle to stay relevant.

  2. Prepare for attack.
    Sometimes the best defense is a good offense. Use what you have learned or uncovered in your SWOT analysis to create deposit products that will allow you to defend or retaliate against competitor actions in the marketplace. Have these products created and dormant on your institution’s system, ready to activate if you identify a threat. Being prepared will help you limit the amount of damage and possibly turn the table against your competitor. For example, if a competitor uses rates to try to steal your depositors, introduce a new, highly rate-sensitive product that mirrors the rate of the competitor. This strategy also avoids cannibalizing your low-cost deposits.

  3. Have a defensive marketing plan at the ready.
    Be sure to set aside contingency resources and marketing dollars to boost promotion and awareness of your defensive actions to your existing customer base. If you don’t let your customers know what you have available for them, you will lose them. As noted in the introduction, the cost to get your depositors back far outweighs the cost to retain them, so spend the money and win the war.

If your institution focuses on these three areas quarterly as part of your deposit strategy plan discussion with your asset-liability committee, you will be ready for the war coming on deposits.

This article, published in the October 2019 issue of The Missouri Banker, was submitted by MBA associate member Detalus Advisors. Brian Cox is a director and portfolio manager in the institutional group at Detalus Advisors, a financial services firm that focuses on balance sheet strategy and investment management for financial institutions. Visit for more information.