Although deposit growth will be tough this year, branch expansion continues.

• Position: MARKETING NEWS

DEPOSIT GAINS WILL BE DIFFICULT TO ACHIEVE THIS YEAR, primarily because of stagnant employment, which will constrain disposable income, according to the most recent demographic and competitive outlook report from Bancography, Birmingham, Ala. A reviving stock market is also expected to recapture some bank funds, the report notes.

The report focuses on current demographic and competitive characteristics in U.S. metropolitan areas having at least 500,000 residents.

"A halting recovery in employment may provide some boost, but institutions seeking to increase deposits will need to employ aggressive marketing or resort to price-based appeals," the report says. If opting for the latter, be sure to link any premium rate offers only to relationship products to ensure long-term stability of new deposits, according to the report, which is entitled, "Strategic Planning for 2011: Demographic and Competitive Outlook."

Banks should anticipate margin compression from the deposit side as the economy recovers, loan demand revives and interest rates rebound from historic lows. "After two years of minimal deposit rates, pent-up consumer expectations may force banks ... to raise rates rapidly to compete with prospective stock market yields."

Acknowledging that economy conditions will vary widely by region, the report recommends that banks in regions with stronger economic recovery pursue a "first-mover advantage" strategy in terms of marketing and advertising investments, credit availability and deposit pricing...