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Top banks lost $1 billion to Durbin

By Claes Bell ·
Friday, March 30, 2012
Posted: 4 pm ET

Get your tiny violins ready; a new report from SNL Financial reveals just how big of a bite new regulations have taken out of bank revenues.

Why should you care? In isolation, it's really strange that, even as checking account holders have gotten more sensitive to fees, large banks have made headlines and stoked customer anger by continually raising monthly fees and making it harder to avoid them.

You'd think that banks would take the hint and at least put off raising fees until bank customer rage had subsided a little bit and they'd be more likely to avoid a massive customer exodus.

Many financial writers, including myself, have been saying for months that the X factor pushing banks to impose checking fees is the slate of new regulations that took effect in 2010 and 2011 that restrict how and when banks charge fees to both their customers and merchants. Now that those changes have slashed bank fee income, banks are looking for ways to get it back.

SNL Financial has some new data on just how big the hole is that banks are trying to fill. The company looked at how much each of the top banks had lost to the Durbin amendment, which restricts the amount of each "swipe fee" banks charge merchants for processing a debit card transaction. Here are the results for the top 5 banks by assets, keeping in mind we're talking about just one quarter.

  • JPMorgan Chase: -$600 million.
  • Bank of America: -$430 million.
  • Citi: No significant change.
  • Well Fargo: -$365 million.
  • U.S. Bank: -$77 million.

While checking fees are just one small piece of bank revenues overall, those losses add up to nearly $1.1 billion and go a long way toward explaining why the big banks have been so bullheaded about raising fees.

Being the nerd that I am, I decided to go into those same statements to get a sense of how all the new regulations, from opt-in overdrafts to Durbin, had affected bank revenue since 2009. According to my math, together, those five banks have seen annual income from checking account fees decline 26 percent, or $5.4 billion, in two years.

That's a lot of money, even for the big banks, and bank executives get paid big bucks to make sure those numbers go the other way. If they can't, they'll soon be sent walking, which is why these banks are sticking to these fee hikes.

What do you think? Why are banks increasing fees despite the fact it's losing them customers? Are banks justified in doing so?

Follow me on Twitter: @ClaesBell.

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