NEW YORK (
(JPM - Get Report)
appears to be halfway done with implementing new fees on depository accounts to make up for lost revenue - ahead of big-bank competitors, according to an analysis released on Monday.
But, ultimately, the industry at large may only be able to recoup 35% to 40% of
an estimated $25 billion
in fees it once collected from debit and credit card use. Additionally, the implementation of new fees will take time, with Nomura analysts led by Glenn Schorr and Brian Foran characterizing fee recovery as a "slow burning issue" in 2011.
In a report on Monday, the Nomura team performed some back-of-the-envelope calculations to assess how much of that revenue the industry could recover by adding new fees and how far along some big banks are in the process.
The analysts noted that JPMorgan executives said at its investor day last month that the bank has already converted 8 million free checking accounts into new terms with fees of $10 to $12 per month. This represents revenue of about $1.5 billion to $2 billion a year, about 75% of the impact of two provisions known as Durbin and Reg E that stymie bank fees on card users as well as merchants who accept card transactions.
"This would suggest JPM has already progressed more than halfway through our total revenue recapture estimate," the analysts said. "However, these conversions were likely late 2010 events and may not yet be fully reflected in 4Q10 results.
Bank of America also outlined plans to charge customers $6 to $25 per month, the analysts noted, though it's not clear how far along in the process of implementation the bank is.
Nomura thinks it's "generally plausible" that Bank of America's new fee revenue could top $2 billion. That would be about 42% of the revenue lost from Durbin and Reg E. Schorr and Foran said that figure is "roughly in line" with the estimate that
(USB - Get Report)
provided when saying it could recoup about half of fee revenue lost from financial reform.
The analysts concluded that regulators don't seem to be pushing back against banks' decision to implement fees on once-free checking accounts - a good thing for banks' bottom line, but perhaps counter to what lawmakers and regulators intended with the Dodd-Frank legislation and other anti-fee rules.