Squeezed by regulations under the Dodd-Frank financial reform law, banks are looking to find new ways to wring fees from customers. In 2012, expect to see higher minimum balance requirements and an ongoing push to increase customers' credit card spending, according to a "2012 U.S. Banking Sector Outlook" report from Trepp, an analytics company that provides information to the banking industry.
Other industry analysts predict that some banks could raise overdraft fees from $35 to a new high of $40 and that more institutions will increase monthly maintenance fees on basic checking accounts to between $12 and $15.
Over the past three years, various new regulations under the Dodd-Frank Act and the Credit Card Act have reined in certain aggressive fee practices. More regulations in 2012 are expected to further hamper banks' ability to make big profits off the basic banking activities of consumers.
Yet banks' losses from Dodd-Frank and other regulations haven't been as dramatic as portrayed. In 2007, the percentage of revenue that came from fees was more than 40 percent, according to Trepp. In 2011, that percentage dropped just 4 points to 36 percent.
Big banks are not expected to grow much next year. Financial services firm Keefe, Bruyette & Woods forecast no growth in core revenues next year at Bank of America and JPMorgan Chase.
And banks are scrambling to regain revenue. Doug Miller, a senior analyst with Corporate Insight, a firm that provides analysis to the banking industry, said he expects banks to create more packaged and tiered account plans that waive fees if customers bundle together different types of accounts, such as savings, checking and money market, at the same institution. "It is a way to create more of an ongoing banking relationship," said Miller. "They want all your basic deposit accounts."
For consumers, however, opening more accounts with the same institution has a cost: It makes it harder to unwind personal finances from that institution and monopolizes a customer's funds.
These efforts to earn more money may also fall short. "We are not optimistic that these steps will improve profits in a meaningful way," the Trepp report said. "At best, [they] will only contribute marginal additional amounts to non-interest revenue."
With diminishing opportunities to lift fees from customers and a tougher regulatory landscape, the outlook for the banking industry, especially the biggest banks, is grim in 2012. Profits are expected to remain flat for the biggest banks, and financial institutions are expected to slash more jobs.