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Citigroup CFO says deposit beta pressure now coming from retail, not corporate

Citigroup Inc. CFO John Gerspach said the bank expects more pricing pressure on retail deposits while corporate deposit costs might be stabilizing.

Banks have been paying close attention to deposit betas, a measure of how much of the Federal Reserve's rate hikes are passed on to depositors. So far, banks have said most of the pressure to pay higher rates on deposits have come from commercial clients, not retail ones. But Gerspach said on the bank's Jan. 14 earnings call that the dynamic could flip.

"We have seen stabilization on the betas on the corporate deposits and there may be some continued pressure upward there, but much less so. To the extent that there is going to be any, I think, large moves in betas, it will be on the retail side," Gerspach said.

He also said that the bank expects just one rate hike from the Fed this year. Earlier in the day, former Fed Chair Janet Yellen said the central bank might be done raising rates in this economic cycle. But even if that is the case, Gerspach said banks should expect to see continued increases in deposit costs.

"[Retail deposit betas] are likely to continue to increase into '19 even if there are no further rate hikes," he said. "If you look back at the last time rates increased, deposit betas — the retail deposit betas continued to increase for some time after the last rate increase."