Capgemini Forecasts Tough Competition Among Global Banks for Deposits in 2024

Despite expected rate reductions, Capgemini predicts that global banks will maintain robust profitability amidst fierce competition for deposits in 2024. Following significant capital outflows triggered by the collapse of several banks in the USA and Europe, attracting deposits has become crucial for crisis prevention and long-term stability, according to Capgemini’s report titled “Retail Banking: Key Trends of 2024.”

The report highlights the banking sector’s challenges in 2023 due to sluggish economic growth, inflation, and high borrowing costs. Interest rates rose sharply in developed and developing economies over the past two years, leading to substantial client fund outflows from banks. In the US, the Federal Deposit Insurance Corporation recorded the most substantial quarterly deposit decline since 1984, with deposits decreasing by $472.1 billion in the first quarter of 2023. American banks experienced four consecutive quarters of declining deposits, with individuals withdrawing $98.4 billion from their accounts in 2023.

Similarly, major European markets saw a drop in overall deposit volume in early 2023, with countries like Spain experiencing significant declines. In the UK, citizens withdrew savings from their accounts at record rates in May 2023.

Looking ahead to 2024, Capgemini emphasizes the need for banks to balance resilience and innovation to navigate global macroeconomic complexities successfully. This includes adapting to new players, technologies, and regulations reshaping the banking landscape.

Furthermore, with decreasing demand for loans and rising borrowing costs, banks must anticipate deteriorating credit quality cautiously. To maintain profitability, banks will need to reduce expenses, streamline operations, and optimize their networks.

Capgemini identifies high-interest rates, money supply contraction, stringent banking regulations, and geopolitical tensions as key drivers of economic turbulence in 2024.

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