Pressured by regulatory changes which limit debit card
interchange fees charged by banks, Bank of America (
BAC
) plans to alter the fees and services on its checking, savings and
other customer accounts (See
BoA's Card Fee Income Down on Recession and
Regulations
). Bank of America is not the only bank to change its fee structure
as new customers of JP Morgan (
JPM
) are required to make a monthly deposit of $500 or keep a daily
balance of $1,500 in order to avoid a $12 fee on checking accounts.
Additionally,
Wells Fargo
(
WFC
) replaced free checking accounts with value checking, which
requires a monthly deposit of $250 or a minimum balance of $1,500
to avoid a $5 monthly fee.
We have a
$16.12 price estimate for Bank of America stock
, about 5% above market price. We estimate that deposits and
consumer loans generate roughly 13% of the company's stock
value.
Bank of America is introducing four new accounts - a basic
account plus three other accounts offering enhanced, premium and
electronic-only services. Users will have to pay monthly fees
unless they keep minimum balances, make regular deposits and use
online services.
Changes to the fee structure is the result of Bank of America's
effort to make up for lost revenues following a wave of regulatory
changes limiting interest rate increases on credit cards as well as
overdraft charges and interchange fees charged by banks. Bank of
America could lose an estimated $2.3 billion in revenues a year due
to the regulatory changes.
Impact on Consumer Checking, Savings and Other
Deposits
Bank of America is the largest bank in the U.S. based on
deposits ($975 billion as of June 30, 2010), and serves nearly 59
million customers across the country. We estimate that the
company's consumer checking and savings deposits will grow from
about $412 billion in 2010 to $543 billion by the end of our
forecast period as customers increasingly shift towards large and
dependable banks.
As the new account structure prompts customers to make
sufficient monthly deposits to avoid fees, Bank of America could
see upside to our deposit estimates.
Impact on Service Fees as % of Deposits
The change in fee structure will also directly impact Bank of
America's service fees charged as a percent of deposits. We
currently estimate that this ratio will remain stable at its
current level of roughly 1.7%, but the recent change could trigger
growth in this metric as service fees increase.
To see the impact of various trends in consumer deposits and
service fees on Bank of America's stock value, drag the trend
lines in the modifiable charts above.
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.