The Breakdown | Explaining Southern California's economy

Why your bank doesn't want you anymore: You're too poor

OAKLAND, CA - OCTOBER 13:  A man walks his dog in front of a Chase bank office on October 13, 2011 in Oakland, California.
OAKLAND, CA - OCTOBER 13: A man walks his dog in front of a Chase bank office on October 13, 2011 in Oakland, California.
Justin Sullivan/Getty Images

Controversial stuff from Bloomberg this morning about how banks are thoroughly unexcited about bread-and-butter customers who have less than $100,000 in deposits:

JPMorgan Chase & Co. (JPM), the largest U.S. bank by assets, said about 70 percent of customers with less than $100,000 in deposits and investments will be unprofitable following regulations that cap lenders’ fees.
“I’m trying to give you a proxy for what the banking industry has to look forward to if you don’t take into account business bank clients and getting more of the affluent wealth wallet,” Todd Maclin, chief executive officer of consumer and business banking at the New York-based company, said today at an investor presentation.

The biggest U.S. banks are grappling with lost revenue from regulations such as those that cap debit interchange fees and overdraft charges, making customers with low deposits more expensive for lenders to manage. JPMorgan, run by CEO Jamie Dimon, sees its greatest opportunity with affluent customers that have more banking relationships with the company, Maclin said.

There's a distinction to be drawn here between banks claiming reduced profits on — in JPMorgan's case — a whopping 70 percent of customers and claiming no profits. Are they telling the truth, in other words, or simply protesting the new financial regulations that are reining in their ability to charge various fees, both transparent and opaque?

For JPMorgan, you have to seriously wonder about its motives, given that it turned in an impressive 2011 overall, with good numbers on the consumer side. If anything, the operation was weighed down by its investment banking business.

Rival Wells Fargo did much better, mainly because it's steered clear of i-banking. And as a whole, the big banks did better in 2011 than they had in the preceding five years. 

So are the big banks crying wolf? Probably. They're certainly doing a good job of scaring off boring old low-deposit retail customers so they can focus — allegedly — on high net-worth individuals. Which could be another way of saying they need to attract less risk-averse clients to whom they can sell higher-margin investment-banking services. While the big banks gouge the little guys, i-banking — formerly a huge driver of profits — is the business they need to see fixed.

And the business they're most concerned will be altered by regulations like the Volcker Rule.

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