This specialized report is for institutions that want a micro-level, deposit management oriented understanding of the specific supply and pricing behaviors of their core deposits and CD’s. The report provides key insights to grow core deposits, support precise supply management, and create repricing discipline. Included are forecasts of future trends in deposit supply by category (or tier) and supply reactions to changes in interest rates, rates paid, fees, and other influences.
The focus of this report is on making better tactical deposit management and pricing decisions. Normally based on weekly time series data because of its higher level of behavior information, supply and repricing behaviors are quantified at a detail level that supports core deposit growth with smart deposit pricing in any interest rate environment. Interpretation of results and guidance is provided on how to grow core deposits and create “repricing discipline” in all categories.
The MPS Deposit Supply Analysis Report will empower your institution to:
- Grow core deposits by properly addressing both pricing and non-financial related motivators
- Quickly respond to deposit market changes using quantified knowledge of supply sensitivities
- Better anticipate and act to control intra-category cannibalization caused by repricing
- Create a long term lower cost of funds by understanding and leveraging non-rate influences
- Better understand and manage account attributes and fees as deposit supply influences
- Quantitatively understand market level or specific competitor deposit pricing dynamics
The report contains consultative discussions of report findings and their specific applications in deposit management and creating repricing discipline, in addition to presentations of the forecast data. Sections in the standard report include:
Executive Summary: This section summarizes the historic data, outlines the forecast results, and presents specific core deposit growth, deposit management, and repricing discipline inputs. Section material draws information from the detailed analyses throughout the report and condenses it for quick understanding by management and presentation to institution staff and the Board.
Overview of Historic Data: Because the report’s statistical analyses are derived from recent institution experience, presentations of the historic deposit record are made. The main emphasis is on reviewing recent total balances supplied trends and rates paid/repricing behaviors by category.
Forecast Data: This section presents forecast data by category of deposits across multiple planning horizons for selected interest rate scenarios. The total balances supplied forecast results establish current category level supply momentum and own rate paid sensitivities (elasticities) and between category sensitivities to rates paid (cross elasticities) of funds supplied. Rates paid analyses benchmark current rates paid to historic pricing and define beta coefficients and lag behaviors.
The statistical analyses include comprehensive sets of potential influences on deposit behavior, such as seasonality, day of the week, etc. Dimensions of the market environment (e.g. competitor repricing) is also analyzed, forecast, and assessed.
Estimated System of Equations: The statistically estimated system of institution-specific simultaneous deposit behavior equations is documented in this section. In addition to details, each equation is summarized and general commonalities within the equation system are highlighted.
Description of MPS Methodology: A comprehensive description of the MPS Advanced Assessment Methodology© is provided in this section. This fully documents the statistical processes used in producing report outcomes.
Clients can customize their standard report with optional components:
Segmentation Analysis: The historic account level data that underlie the statistical estimations can be drilled down into to identify account attributes or customer characteristics that are determinants of “best balances” (those with favorable supply related patterns). Segmentation analyses can also show relative performance by branch, state, or across holding company banks.
Maintenance: Business confidence requires that forecasts of tactical deposit behavior be monitored over time, periodically back tested, and updated frequently. All of these actions are accomplished in MPS’s report maintenance program.
Data Production Assistance: If institution staff, expertise, or time is limited, MPS can provide assistance with data set creation. Normally this intakes dumps of account level data and transforms them into data formatted as “run ready” for MPS statistical analyses.
All deposit analyses are produced using the MPS Advanced Assessment Methodology©. This patent pending, advanced econometric approach analyzes historic deposit behavior in a simultaneous equations system that reflects banking practice and all depositor influences. It produces high precision supply and value forecasts that quantify total balances, rates paid, and retention behaviors, plus inter-category interdependencies. Because unambiguous linkages are maintained from the data to every application, audit trails for all reports are clear and complete.