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Banks' 2010 Overdraft Revenue to Fall 5 Percent to $35.2 Billion

From: "Banks' 2010 Overdraft Revenue to Fall 5 Percent to $35.2 Billion, Moebs $ervices Forecasts", Moebs $ervices, 3/24/10

For Release On Wed., March 24, 2010  
Contact:  Kim Kellogg/Harden Communications Partners
510-325-3195 (m) 510-635-4150 (o) 

Banks’ 2010 Overdraft Revenue to Fall 5 Percent to $35.2 Billion,
Moebs Services Forecasts

(Lake Bluff, IL, March 24, 2010) --The uncertainty of financial reform and mandatory opt-in to overdrafts for debit cards and ATMs will shrink financial institutions’ revenue from overdrafts by $1.95 billion in 2010 according to Moebs $ervices, an economic research firm based in Lake Bluff, IL.  Overall, banks and credit unions should earn about $35.2 billion in 2010.  This is down from $37.1 billion in 2009 according to Michael Moebs, economist and CEO of Moebs $ervices.

“Last year we estimated $38.5 billion in overdraft revenue for US depositories”, said Moebs. “This year, the uncertainty of what will happen with financial reform in Congress, and the impact of Regulation E’s amendment for mandatory opt-in on debit card overdrafts really took the wind out of the overdraft revenue sails.” 

Year Consumer OD Revenue (Billions Median OD Price
2010 $35.2 Est. $27.00
2009 $37.1 $26.00
2008 $35.4 $25.00
2007 $34.1 $25.00
2006 $31.5 $25.00
2005 $29.7 $25.00
2004 $27.9 $25.00
2003 $27.1 $22.00
2002 $25.0 $20.00
2001 $22.2 $20.00
2000 $19.9 $20.00

Source: Moebs $ervices, Inc.

Through the first three quarters of 2009 overdraft revenue was accelerating on an annualized basis to $39.1 billion over $35.4 billion in 2008, or at a pace over 13 percent, according to Moebs. “About $2.0 billion of new revenue was lost in the fourth quarter due to the uncertainty,” said Moebs.  This was also due to the press that Wall St. banks received for the high prices for overdrafts, according to Moebs.  “This caused many huge banks with high prices to introduce floors on checking balances subject to overdraft fees and to put ceilings on fees charged,” he noted.

Moebs forecasts that overdraft fee revenue for financial institutions will be the lowest it has been since 2007. 

“Banks and credit unions are having a difficult time trying to get their operating systems to comply with recent Federal Reserve amendments to Electronic Banking (Reg E) and Truth-In-Savings (Reg DD),” said Moebs.

“Some institutions like Bank of America have chosen not to offer overdrafts on debit cards and ATMS.  Interestingly, almost an equal number of banks and credit unions have decided to enter the overdraft business for the first time.  This points out that the recent regulations written by the Fed are well done since they offer more choice to the consumer without regulating the price or service design,” said Moebs.

According to Moebs, 2010 is going to be a year of mixed results on overdraft revenue for banks and credit unions.  “The huge banks over $50 billion in assets, like Bank of America, Chase, and Wells Fargo will definitely lose revenue,” he said.  “However, many community banks and credit unions should show an increase in revenue.  Numerous community banks and credit unions are now reporting big increases in new checking accounts since Bank of America decided to get out of the overdraft business,” he said.  

“One bank’s inability to adjust to the changing overdraft landscape is another bank’s bottom line increase, and this dynamic is all to the consumer’s benefit,” concluded Moebs.

About Moebs Services
Michael Moebs is an Economist and the CEO of Moebs $ervices, headquartered in Lake Bluff, Ill.  For more than 25 years,  Moebs $ervices has been collecting and analyzing primary empirical data about financial institutions’ services, pricing, operating expenses and financial condition in a counter-intuitive  approach that provides simple solutions to complex issues.

Written By: rnybeck
Date Posted: 3/24/2010
Number of Views: 5844