Fitch: Post-Crisis Bank Fees Not Enough

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NEW YORK--(BUSINESS WIRE)-- Fitch believes revenue generated from U.S. bank fees will fall short of that reaped pre-crisis, a contributing factor resulting in lower returns for the industry.

Regulatory changes that curbed overdraft and insufficient fund fees have added to revenue losses. In addition, the recent implementation of the Durbin Amendment, limiting interchange income, will add further pressure to bank fee income.

Banks continue to struggle with offsetting lost revenues through various measures. We feel a replacement of lost fee revenue on a dollar-for-dollar basis via new fees is unlikely. Ultimately, the competitive dynamic will shape how the industry charges for services in the future, likely with larger banks in the forefront testing which fees will be adopted and which fees will be abandoned. For example, Bank of America recently introduced a plan to charge a $5 monthly debit card fee. After significant public outcry, the plan was quickly dropped.

We believe the introduction of new and potentially more transparent bank fees could cause some shift in consumer behavior, but the overall impact would likely be measured. Customers who choose to withdraw funds from banks and place them with non-profit credit unions claiming to offer truly free checking will likely be challenged by finite ATM access, smaller branches, and less product offerings. Brokerage accounts that offer free checking and limited ATM fees are another customer alternative, but they are limited in scope to those with existing accounts.

Banks have positioned themselves in the fight to regain revenue via cost cutting and the elimination of certain products, including bonus point card incentive programs. We feel those efforts could potentially help net income, but on their own would fall short of a complete offset to the lost revenues from changes to overdraft and interchange regulations.

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The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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