Working stiffs are no longer worth it.
In the wake of the financial meltdown, new regulations that limit bank fees and overdraft charges are making it expensive for the nation’s biggest bank to service customers with little to show on their ATM slips.
Indeed, most customers with less than $100,000 in investments and deposits are no longer “profitable” for JPMorgan Chase. The firm generates the bulk of its retail banking revenues — about 55 percent — from affluent customers that boast more than that.
“The new rules will limit alternatives for consumer banks to grow revenues,” Todd Maclin, head of JPMorgan’s consumer banking business, told shareholders yesterday. “It’s not great policy, but it is our future and it will have consequences for people depending on what their status is and what their options are.”
Maclin’s statements, delivered as part of day-long presentation by JPMorgan CEO Jamie Dimon and other top JPMorgan execs, was not the first time bank officials have warned that financial overhaul will hammer revenues and force them to focus on expenses.
Since the so-called Durbin amendment, which limited the “swipe” fees that banks can charge merchants for processing debit-card purchases, took effect Oct. 1, banks have been scrounging for ways to introduce fees to replace the lost revenue.
In one high-profile flop, Bank of America abandoned a plan to charge some debit-card users $5 a month after a backlash from consumers.
“You have to be much more conscious of how those calculations change,” Dimon asserted in yesterday’s remarks.
The outspoken bank boss also weighed in on a wealth of other issues confronting the bank during the day-long presentation.
Dimon characterized the headwinds facing the financial industry, including added regulation and choppy markets, as a cyclical trend that will eventually abate.
Still, he said that Wall Street, which saw 2011 bonuses slashed by as much as 30 percent, could be dealing with a more permanent change in compensation.
Dimon also noted that getting the big banks to meet higher capital requirements would take priority over increasing the firm’s 25-cent a share dividend. The nation’s top banks are expected to receive the results of their most recent “stress tests” on March 15.
Dimon and other executives also disagreed with vocal bank analyst Mike Mayo’s call to break up the sprawling financial firm because it may be more valuable to shareholders.
“These businesses have been built over a long period of time and we benefit from that,” Dimon said. “My guess is the company will be far more valuable in 10 years doing what we do today for 10 years.”