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The new normal of banking

By David McMillin · Bankrate.com
Saturday, November 19, 2011
Posted: 12 pm ET

While account holders adjust to the potential for new fees, the CEO at one of America's biggest banks plans to make some adjustments of his own.

In Business Week's coverage of the Bank of America Merrill Lynch Banking and Financial Services Conference, BofA CEO Brian Moynihan discussed what he called the "new normal" of retail banking.

It's going to be a smaller platform. It won't be quite the same as it was at Bank of America and around the industry. We have 42 million retail customers. Many of those don't contribute or overcome their cost-to-serve.

Translation: If you're an everyday consumer with a few thousand bucks in your checking account, you're not pulling your weight for the bank's balance sheet.

While Moynihan's remarks indicated he now understands retail banking will not be as profitable as it was before the latest round of regulations, I don't expect BofA or its shareholders to accept smaller profits. The bank's stock has slumped to the single digits, and I would guess executives are debating how to transform the "new normal" into "new money." How will they do it? The plan to cut 30,000 jobs, which BofA announced in September, is only the beginning.

It's safe to say we're going to continue to feel the impact of these adjustments at all of the big banks. Sources at Citi began grumbling about layoffs this week, too, and this reduction in employees will undoubtedly have an effect on customer service. If the retail banking division isn't earning the return these banks want, we could see all kinds of changes. From shorter branch hours to fewer in-person tellers and fewer phone representatives, cost reduction can take many shapes.

Of course, shrinking a workforce is only one piece of the equation. As my co-blogger Claes Bell reported earlier this week, banks are testing all kinds of under-the-radar fees.

What else do you think the new normal means for customers at big banks?

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