Case Study: Deposit Pricing
Situation: A top 15 bank had aggressive growth goals around gathering core deposits in a highly competitive falling rate environment. It needed to substantially increase deposit growth, but was worried about cannibalization of its large book of low-rate MMDA. The bank introduced a new money promotional strategy.

Key Findings: MMDA market rates and elasticities varied dramatically by region and tier especially in relation to the bank’s structural position in each market. Impacts of advertising and re-pricing varied significantly by market. Competitive make up of markets was key driver to campaign success.

Action Taken: The bank launched the promotional offering with high rates and advertising in select markets. Less elastic markets got rates slightly above market with minimal advertising. Additional direct mail was done in the most attractive markets. Re-pricing guidelines were given to ensure profitability of new product.

Results: MMDA balances grew ahead of plan (with less re-pricing than was expected, consistent with Novantas-provide benchmarks). The bank is on target for balance growth plans at an increase of $5 million of spread compared to plan.