But the other issue that might hinder revenue is that banks are placing fees mainly on accounts related to "low-quality" customers - those who have low incomes, low balances in deposit accounts and few other banking products, like loans, on which lenders can earn income.
As a result, some of those customers may leave a bank because it isn't worth paying $10 or $12 a month for a checking account that contains just a few hundred dollars or less. In other cases, customers with several accounts at different banks may consolidate all the funds at just one to avoid penalties. The fees are therefore likely to push low-income customers out of the traditional banking sphere and give industry leaders more market share in areas where they are already dominant.
The analysts came to their conclusions using estimates from a Bank of America presentation last year that indicated about half of its depositors were "low-quality" and assuming that roughly 15% would leave the franchise because of new fees. That left 13.7 million low-quality accounts with Bank of America that were fee assessable out of a total 48 million accounts. Using the same assumptions for JPMorgan, that would mean 13.6 million of its relationships were "low-quality." With over 8 million accounts already converted, it's more than halfway done with the process.
"While there are many moving parts to this equation, we anticipate the level of revenue these incremental fees may generate to be substantial," says the Nomura team. "For example, we estimate 30-45% of universal bank customer accounts may be eligible for bank re-pricing. However, the timing differences of increased fees offsetting revenue and cost pressures is an issue as banks are already facing these hits while ramping up fee generation has just begun and will likely be a slower burning issue for 2011."
-- Written by Lauren Tara LaCapra in New York
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