Dimon Took Heat But Regional Banks Rely More on Overdraft

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Wall Street bore the brunt of lawmakers’ assault on overdraft fees last week, but it’s regional banks that rely most on that revenue, according to a note Tuesday from Morgan Stanley.

Consumer overdraft fees accounted for almost 5% of 2020 revenue at Alabama’s Regions Financial Corp., the bank most dependent on those charges, according to the note. They represented around 2% of revenue at firms including Citizens Financial Group Inc. and Huntington Bancshares Inc.

That contrasts with the nation’s biggest banks. Such fees generated just 1.2% of revenue at JPMorgan Chase & Co., a figure that’s in line with the banking giant’s peers, analysts including Betsy Graseck and Manan Gosalia said in the note.

Still, New York-based JPMorgan collected the most revenue in dollar terms, raking in almost $1.5 billion from overdraft fees. Wells Fargo & Co. placed second, at roughly $1.3 billion.

It was those figures that caught the attention of Senator Elizabeth Warren last week. The Massachusetts Democrat grilled JPMorgan Chief Executive Officer Jamie Dimon on his bank’s policies, asking if he would voluntarily refund the fees to his customers. Dimon declined, arguing that the firm provided relief to consumers who asked for it.

Banking executives say they’re aware of the potential harm overdraft fees can do to low-income consumers, and they’ve been taking steps to alleviate the burden.

In April, PNC Financial Services Group Inc. CEO Bill Demchak called overdraft fees an “unsustainable revenue stream” as he touted a new product he said would help consumers avoid those charges. The bank said the change would save customers $125 million to $150 million in overdraft fees annually.

Regions pointed to January remarks from Chief Financial Officer David Turner, who said that “continued enhancements to our overdraft practices and transaction postings” are likely to keep service fees below pre-pandemic levels.

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