Bank Fees Rise as Lenders Try to Offset Losses

Even now, after all those bailouts, banks never seem to tire of dipping a little deeper into your wallet. Despite the tough economic times and increased scrutiny from Washington, they are keeping most fees at record highs, and are eking out slight increases on others like overdraft charges — a step they rarely took during past recessions.

The result? Americans are paying more to save and spend their money.

And while the increases are still relatively small by historical standards, they illustrate how banks are looking for almost any nugget of income to help offset huge loan losses and lower revenue as consumers buckle down on spending.

The nation’s biggest banks — those that received the biggest bailouts from taxpayers, and are once again gaining strength — charge fees that are on average at least 20 percent higher than those at smaller lenders, according to Moebs Services, a economic research firm used by banks and federal regulators.

Some of the charges are getting more creative. Several big banks — including JPMorgan Chase, US Bancorp and Wells Fargo & — recently began billing some small-business customers for federal deposit insurance increases. Citigroup and PNC Financial assess around a 3 percent international transaction fee when customers swipe their debit cards overseas.

Bank of America recently introduced a raft of changes. In June, it raised the fees on its basic monthly checking account to $8.95 from $5.95. In April, the bank considered raising its overdraft charge to $39, nearly double what the typical bank charged a decade ago. It backed down only after an eruption of consumer complaints, tweaking its rules to keep its initial fee at $35.

And then there are credit cards: banks are scrambling to raise rates and fees before a credit card reform bill that President Obama signed into law last month takes effect. JPMorgan Chase recently announced it would raise some balance transfer fees to 5 percent, from 3 percent, in August. Citigroup, Bank of America and other lenders have also been raising the interest rates for millions of cardholders.

Over all, fees at the biggest banks are running at their highest levels on record. The average A.T.M. charge, which generates billions of dollars for banks annually, rose at the end of 2008 to $1.97, up from $1.78 the year before and nearly double the 89-cent average recorded in 1998, according to Bankrate.com.

Other charges are more eye-popping: today’s typical $30 stop-payment fee is about twice as much as a decade ago, according to Moebs.

But the most unexpected change has occurred in overdraft fees — the industry’s most lucrative and controversial charge — where the typical fee rose to $26 after five years at $25.

That is only a modest 4 percent increase, compared with the double-digit overdraft fee increases a few years ago, when charges rose to $25 from $22. But amid intense scrutiny from regulators and lawmakers, consumer advocates — and even some bankers— are surprised.

“We’ve never seen a price increase during a recession,” said Michael Moebs, the chief economist and founder of the research firm that analyzed the fee data at more than 2,200 lenders. “What the bankers are saying is that I want to maintain my revenue.”

Scott E. Talbott, a lobbyist for the Financial Services Roundtable, said that the banks’ fees reflect the cost of providing those services and the rise in overdraft charges reflects increased risk. “There is an increased riskiness around repayment because of the recession,” he added.

Most banks have been reluctant to raise overdraft fees or have made subtle but potentially lucrative changes to how they are assessed. Bankers are worried about criticism from Washington and would rather find ways to bolster profits under the radar.

For instance, many banks already generate rich profits by charging consumers high interest rates for loans, while keeping interest rates paid on money market and checking accounts low — a trend that has become more acute as the Federal Reserve keeps rates near zero to help stoke an economic recovery.

But that may not be enough. Large banks, which tend to charge the highest fees, incur a range of expenses that smaller banks do not, including high nationwide advertising bills and the costs of operating networks of A.T.M.’s and retail branches. Many smaller banks are also struggling now more than ever to offset losses and dwindling revenue.

And as consumers themselves rein in their finances, raising the overdraft fee has become an easy option. With fewer customers overdrawing their accounts, overdraft fees risk shrinking to a smaller income stream from what Moebs estimates is a $38.5 billion business this year. That is, unless banks raise fees on customers who run into trouble.

Aaron Fine, a retail banking consultant at Oliver Wyman, said that overdraft fee income could fall 5 to 20 percent for some banks in the second and third quarter. “That is the multibillion-dollar question,” he said. “How do you replace those fees with something else?”

Two large regional banks, which have been hit hard by the recession, appear to be struggling to find answers.

KeyCorp, a regional lender based in Cleveland, raised its overdraft fee by 50 cents to a dollar for repeat offenders in the last few months, bringing its maximum charge to as much as $39. Comerica, which has big operations in Michigan and California, raised similar fees by approximately $2 to $3 when it introduced a tiered fee structure that charges $25 to $37 as the number of offenses increase.

Regulators and lawmakers say they plan to crack down on excessive service fees, just as they did with a new bill barring unfair credit card practices. Federal Reserve officials have proposed new rules that would let debit and A.T.M. customers “opt in” for overdraft protection, or allow existing customers to opt out of the service.

Representative Carolyn B. Maloney, Democrat of New York, introduced more stringent legislation this spring requiring banks to notify customers before they overdraw their accounts.

Of course, consumers do not have to be taken in. Consumer advocates suggest comparing the fees charged by big banks with those of credit unions and community lenders in a given area. When possible, use an A.T.M. in the bank’s network. And if you do incur fees, ask your bank manager about waiving them.

Greg McBride, a senior financial analyst at BankRate.com, said that as banking fees head into overdrive, consumers simply need to be more alert. “We will have to be on our toes to avoid getting tripped up,” he said.

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Startup offers recovery services for midrange companies

Recovery service provider (RSP) Simply Continuous today unveiled data and application recovery services for mid-market customers.
The new services include Data Recovery Vault (for data) and AppAlive (for applications). Data Recovery Vault and AppAlive integrate into existing backup infrastructures and allow companies to peer into their data through a Web portal that allows users to monitor, browse or restore files.
The Simply Continuous recovery architecture combines a variety of technologies, including data compression, data deduplication, network acceleration, encryption, off-site monitoring and recovery processes.  The services automatically and continuously replicate data and virtualized application images.
Data Recovery Vault employs more than 1,300 sensors to actively monitor the service infrastructure so data sets are ready to be recovered when and if needed.
AppAlive captures current images of applications, stores them and provides customers with a hosted recovery environment for virtualized applications.
Tom Frangione, Simply Continuous' CEO, says mid-market customers are facing a "recovery gap."
"Large enterprises have the skills and resources to set up a second data center and deliver recovery services themselves. On the lower end, small businesses are avoiding tape altogether and that's where the Mozys of the world come in," says Frangione. "Mid-market customers have large data sets to manage, but we don't foresee many of them adding additional resources to manage those data sets. They are caught in the middle."
Simply Continuous is backed by $10 million in funding from Greylock Partners and already has a big partner in its pocket. Last fall, the company announced a partnership with Data Domain under which Simply Continuous offers an offsite data protection service called Data Protect Vault for Data Domain.
Simply Continuous uses Data Domain's deduplication storage systems to replicate data offsite. In the event of an outage, customers can recover individual files remotely or, in the event of a site disaster, request a replacement Data Domain appliance to be shipped to the recovery site. 

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Oil prices higher after US data

LONDON (AFP) — Oil prices gained ground on Thursday as the market digested the latest stockpiles data in leading consumer the United States which traders said was supportive overall.
The price of London's Brent North Sea crude for August delivery rose 41 cents to 68.74 dollars per barrel.
New York's main futures contract, light sweet crude for August, gained 33 cents to 69.00 dollars.
"It's all about gasoline (petrol) at the moment," said VTB Capital analyst Andrey Kryuchenkov.
The US Department of Energy said Wednesday that inventories of gasoline jumped 3.9 million barrels in the week ending June 19, compared to expectations for a gain of one million barrels.
Crude stockpiles, however, dropped by 3.8 million barrels, steeper than the 1.3 million barrels expected by most analysts.
"A mixed enough report but somewhat supportive for crude," Kryuchenkov noted, adding: "We are still pleased to see stable gasoline demand."
Oil also got support on the back of a weaker US currency, which makes dollar-priced crude cheaper for buyers using stronger currencies and therefore tends to stimulate demand and push prices higher.
Conflicting signals about the strength of a recovery for the global economy have led to volatile swings in oil prices recently, with some analysts saying they have risen too fast while underlying demand is weak.
Crude oil plunged from record peaks of more than 147 dollars in July 2008 to about 32 dollars in December as the economic downturn hit but the market has since won back some ground on recovery hopes.


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TOPWRAP 4-OECD report, U.S. data back recovery hopes

* OECD revises up projections for economic outlook

* U.S. May durable goods orders stronger than expected

* ECB lends record 442 billion euros in 1st 12-month loan

* U.S. Federal Reserve rate decision later

By Ritsuko Ando and Anna Willard

NEW YORK/PARIS, June 24 (Reuters) - Prospects for economic recovery next year have improved for the first time in two years, the OECD said on Wednesday, while U.S. data showed an unexpected jump in orders for long-lasting manufactured goods, backing hopes the global economy may be healing.

The U.S. data, along with expectations for the Federal Reserve to remain cautious about interest rate hikes, weighed on the U.S. dollar even as it rose against the Swiss franc on reports of intervention.

The Organisation for Economic Cooperation and Development said that the slowdown is close to bottom and that the economies of its 30-member countries should return to modest growth of 0.7 percent next year, a big reversal from a 4.1 percent fall this year.

Its previous forecast was for a contraction of 0.1 percent.

"This is the first time since 2007 that we have revised up the projection," OECD Chief Economist Jorgen Elmeskov told Reuters after the release of the OECD's economic outlook.

"The bad news is that the projection still implies that we are only nearing the bottom now, and the recovery that follows is going to be a very slow one, probably a fragile one."

EYES ON FED

The Federal Reserve Open Market Committee is widely expected to keep interest rates at a record low range of zero to 0.25 percent and maintain planned debt purchases. It is due to deliver its decision about 2:15 p.m. (1815 GMT).

Many analysts say the Fed is also likely to stress that the economy remains fragile and lean against rate hike speculation, while acknowledging signs of activity picking up here and there.

Manufacturing, which accounts for about one-third of the economy, provides a good barometer for overall business health, and the May durable goods orders report showed solid and unexpected gains.

New orders for long-lasting U.S. manufactured goods rose by a much stronger-than-expected 1.8 percent in May, surprising analysts who had expected a fall of 0.6 percent.

"The economy is bottoming here, and we're looking for the Fed to maybe change its statement slightly and maybe start to suggest a more neutral balance of risk. A nod, basically, to an exit strategy," said Kim Rupert at Action Economics LLC in San Francisco.

A separate report showed that U.S. mortgage applications climbed last week from a seven-month low, adding to emerging signs that the three-year housing market collapse may be abating.

But another report showed sales of new U.S. single-family homes slipped in May, underscoring that conditions in the hard-hit housing market were still fragile.

"The numbers point to a stabilization, but certainly not a robust recovery," said Keith Hembre, chief economist at First American Funds in Minneapolis.

ECB POURS MONEY

Central banks around the world have been trying to restore order in money markets and reduce the cost of borrowing for banks, firms and consumers.

The European Central Bank lent banks a massive 442 billion euros ($613 billion) on Wednesday, its biggest fund injection ever, raising expectations for a pick-up in business activity in the euro zone.

Barclays Capital economist Julian Callow said the ECB's loan, its first money market operation with a term as long as one year, should help to keep down 12-month Euribor rates.

"This is all about giving banks confidence in the term structure of their liabilities to ensure they can keep giving loans," he said.

The euro and shorter-dated euro zone government bond yields briefly fell to session lows after the ECB announcement. ID:nLO360695 The pan-European FTSEurofirst rose after the ECB tender results, and was up 2.4 percent at 1508 GMT.

 

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