The Wall Street Journal
, taking cue from last year's backlash related to the imposition
of fees for the overdraft facilities,
Bank of America Corporation
) has called off its plan to levy new fees by the end of this
year. The fees were supposed to be charged to nearly 10 million
BofA's decision to call off new checking account fees until the
end of next year came after a proper review of the company's
retail banking operations. The primary aim of the review is to
find ways to pursue customers to conduct more businesses -
getting a loan, signing up for credit cards or make fixed
deposits - with BofA.
All these, in turn, would have boosted BofA's revenue as well as
shielded customers from additional fees, which they otherwise
would have had to pay. Moreover, the company is trying to make
mobile banking operations more profitable as it can be used to
reach new clients at a lower cost. As of September 30, 2012, the
company's mobile banking customers increased 30% from the
prior-year period to 11.1 million.
BofA's retail banking assessment also involves an effort to gain
more from profitable customers. The company has been hiring
financial advisors and loan officers extensively in an attempt to
sell more financial products and services.
At present, BofA charges monthly fees on checking accounts unless
customers fulfill certain criteria. Moreover, the company has
been testing its new fee structure in the states of Arizona,
Massachusetts and Georgia. BofA is planning to charge $6-$9 per
month on basic checking accounts. Apart from this, the company is
also contemplating monthly fee in the range of $9-$25 on other
Yet, BofA will be giving its customers various options to avoid
these fees by making it compulsory to switch to online banking
including e-payment of bills. Apart from this, the customers can
evade increased fees by maintaining minimum balances, taking a
loan from the company or using BofA's credit card.
The above mentioned pilot project will be continuing as BofA has
not completely ruled out the imposition of new checking account
fees. However, last year, the company had to face stiff
opposition, when it tried to levy additional charges on overdraft
services. Eventually, the company had to retreat its steps from
introducing the debit card fee of $5 per month.
We believe that the banking industry as a whole has been trying
to balance modest economic growth and stiff opposition for higher
fees from customers with shareholders who want to maximize their
holdings. Many other banking giants, including
JPMorgan Chase & Co.
Wells Fargo & Co.
), have plans in place to augment fees or have already hiked
For BofA customers, fee hike postponement is encouraging. Yet, by
delaying fee hike, the company will have to forego revenue growth
that would have been driven by these fee increases.
Currently, BofA retains a Zacks #3 Rank, which translates into a
short-term Hold rating. We believe delay in implementation of fee
hikes might lead to negative estimate revisions. This, in turn,
could lead to downward revision of the Zacks Rank.
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