What is a deposit franchise, and why is it the core of a bank's value?

The deposit franchise is a bank's ability to gather stable, low-cost funding — checking and operational accounts that pay well below market rates because customers value convenience, payments, and the relationship rather than yield. It is the closest thing banking has to a moat: it is slow to build, hard to replicate, and it is what lets a bank fund assets more cheaply than wholesale markets. Its value RISES with rates (the gap between near-zero deposit costs and market rates widens), and quality is judged on mix (noninterest-bearing share), granularity, insured share, and deposit beta. Most bank M&A is, at heart, buying deposits.