(Bloomberg News) JPMorgan Chase & Co., the largest U.S. bank by assets, said about 70 percent of customers with less than $100,000 in deposits and investments will be unprofitable following regulations that cap lenders' fees.
"I'm trying to give you a proxy for what the banking industry has to look forward to if you don't take into account business bank clients and getting more of the affluent wealth wallet," Todd Maclin, chief executive officer of consumer and business banking at the New York-based company, said today at an investor presentation.
The biggest U.S. banks are grappling with lost revenue from regulations such as those that cap debit interchange fees and overdraft charges, making customers with low deposits more expensive for lenders to manage. JPMorgan, run by CEO Jamie Dimon, sees its greatest opportunity with affluent customers that have more banking relationships with the company, Maclin said.
"Lost revenue has to be replaced with higher share of wallet and customer penetration," Maclin said. "You have to get your costs and where you spend your time, to the fullest extent possible, more in line with where the opportunity is."
JPMorgan sees a "significant opportunity to deepen affluent relationships" and a "limited opportunity to deepen relationships" with customers who have less than $100,000 in deposits and investments, according to slides at the presentation.
Profitable Customers
CEO Brian T. Moynihan of Bank of America Corp., the second-biggest U.S. lender by assets, has said his strategy is to broaden relationships with the lender's 8 million so-called preferred clients that are 1.5 times as profitable as the retail group. The Charlotte, North Carolina-based company gives these customers incentives such as removing monthly service fees on checking accounts for using a Bank of America credit card, mortgage or Merrill Lynch brokerage account.
Bank of America abandoned a plan to charge some debit-card users $5 a month for the service after JPMorgan and San Francisco-based Wells Fargo & Co. decided against imposing similar fees. Citigroup Inc. and U.S. Bancorp had already rejected the idea. Maclin said JPMorgan will implement "follow-on pricing" for fees in the future.
"When the world lets us charge something more akin to your gym membership or your card, we'll be right there with them," he said. "In this environment, we're just not going to rock that boat, and we have a brand and a franchise where we can make it up other ways over time."
Branches 'Invaluable'
Maclin said it's possible that fees for checking accounts could reach $20 one day, which he said the bank would "celebrate."