Banks Widely Expect Increased Competition and Costs for Deposit Funding in 2015

Survey Shares Senior Bank Executives’ Outlook on Critical Lending and Funding Topics

ARLINGTON, VA (August 31, 2015) – Promontory Interfinancial Network, LLC (“Promontory”) today announced results of its quarterly Bank Executive Business Outlook Survey on critical lending and funding topics. One-out-of-five survey respondents report deposit costs rising, particularly for retail deposits.

“There has been a lot of conjecture over when banks are going to start feeling pressure on deposit costs,” said Mark Jacobsen, President and CEO at Promontory. “Based on our survey results and confirmed by industry data, it looks like we’re seeing the early stages of an increase, at least for a portion of banks in the industry. Key questions are: How fast will costs rise? How high will they go? And how many banks will be affected?”

Promontory’s Q2 2015 Bank Executive Business Outlook Survey with bank CEOs, presidents, and CFOs, conducted in June found:

  • Deposit competition heating up: Forty percent of respondents indicated that they have begun experiencing an increase in the competition for deposits and 20% of respondents have already seen their funding costs increase over the past year, despite no significant changes to overall interest rates. To address deposit competition, approximately 45% of banks plan to increase deposit rates to keep pace with competition as the demand for deposits grows.
  • Retail deposits in high demand: Nearly 70% of banks expect the cost of retail deposits to be the primary driver behind overall funding cost increases. Retail deposits currently make up 92% of all domestic deposits for community banks with under $1 billion in assets, 89% of all domestic deposits for banks with between $1 billion and $10 billion in assets, and 83% of all domestic deposits for banks with more than $10 billion in assets.
  • Expectations for loan demand remain positive: Seventy percent of respondents expect an increase in loan demand in the coming 12 months. This is only slightly lower than the 74% of respondents that expected an increase in loan demand at the end of the first quarter of 2015. This demand is expected to be primarily driven by the commercial real estate (CRE) market.
  • Residential loans are a key part of bank loan portfolios: Smaller banks reported that they expect to retain more than half of all residential loans that they qualify on their balance sheet. Banks between $1 billion and $10 billion expect to hold nearly 40% of residential loans that they qualify. For both sets of banks, the remaining loans are sold or referred to agency or private market buyers.
  • Banks focusing investments on digital technologies: The rapid expansion of digital banking services is clearly evident, with 63% of banks reporting that they plan to increase their investment in online banking and 74% of banks expect to increase their investment in mobile banking.

For more analysis of the results, download the Bank Executive Business Outlook Survey report at

About the Survey

Respondents were CEOs, presidents, and/or CFOs—people with a top-level perspective of their balance sheet and a pulse on bank strategy. The survey was completed online in June 2015 by 269 senior bank leaders in the positions of CEO, president, or CFO. Respondents were almost entirely at community banks with fewer than $10 billion in assets.

About Promontory Interfinancial Network, LLC

Promontory Interfinancial Network was founded by leading figures in the banking industry—Eugene LudwigAlan BlinderMark Jacobsen, and Alfred Moses—to provide financial institutions with profit-enhancing solutions. The founders envisioned a network, composed of thousands of financial institutions, whose “synthetic size” would help each member institution to compete more efficiently. Today, Promontory’s Network of participating institutions includes approximately 3,000 members nationwide. These members use Promontory's services to acquire and retain large-dollar customer relationships, purchase funding, manage liquidity, reduce collateralization costs, and buy and sell bank assets.

Media Contact

Phil Battey
Senior Vice President, External Affairs
Promontory Interfinancial Network, LLC
(703) 292-3357