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The Honolulu Advertiser
Posted on: Saturday, September 22, 2007

Banks increasing profits from fee-based sources

By David Lazarus
Los Angeles Times

News that Bank of America was jacking up its ATM fee for noncustomers to $3 from $2 prompted the usual muttering about money-grubbing financial institutions that nickel-and-dime people to death.

But BofA's reaching deeper into noncustomers' pockets isn't the real story here. The real story is the fact that virtually all banks increasingly rely on a wide variety of fees to boost the bottom line , and the trend shows no sign of abating.

According to the Federal Deposit Insurance Corp., about 42 percent of banks' annual revenue last year came from noninterest income, which is dominated by money from fees. That's up from about 34 percent a decade ago.

Andrew Gray, an FDIC spokesman, said this highlights "the industry's increasing reliance on fee-based sources of income."

And that's nothing to apologize for or so I was told when I ventured the other day to the glittering towers of Bunker Hill, the financial district in Los Angeles. The money guys I encountered uniformly shrugged off bank fees as a fact of life.

"Banks are in business like anyone else," said Brian Porter, 54, who works for a Fortune 500 company that he said he'd rather not identify. "Their job is to make money, and the place where you make money is fees."

Don't blame the banks, he said. Blame shareholders.

The 50 percent increase in BofA's noncustomer ATM fee obviously won't sit well with anyone who needs some ready cash by turning to one of the bank's 17,000 machines the largest network in the United States.

"It doesn't cost the banks that much," said a disgusted David Kavanagh, 45, who arrived from Ireland this week for some Southern California sightseeing. "It should be free."

The American Bankers Association estimates that, as of last year, there were about 395,000 ATMs nationwide, accounting for 10.1 billion transactions.

BofA by far had the largest number of machines, followed by Cardtronics (10,000), JPMorgan Chase (7,310), U.S. Bancorp (7,164) and Wells Fargo (6,200).

BofA argues that the fee hike benefits its customers by providing an incentive for noncustomers to take their ATM needs elsewhere.

"If you are a customer of Bank of America, you will have greater access to our network of ATMs," said Diane Wagner, a spokeswoman for the bank. "This may also encourage noncustomers to become customers so they can avoid the fee."

Some might say that BofA is solving a problem that doesn't exist. When was the last time you saw a line stretching around the block at an ATM?

"If people don't like paying the fees, use your own bank," said Lorrick Simon, 38, a financial-services worker and BofA customer. "This is a free society. If you don't like the fees, vote with your dollars."

Easier said than done, considering that banks slap fees onto even the most picayune transactions. If you print out the online list of BofA's fees for its various accounts, for example, you get a document 11 pages long.