US banks in the third quarter returned to their established pattern of reducing reliance on overdraft fee income.
The industry reported $1.37 billion in overdraft fee income in the quarter, a 3.0% decline from $1.41 billion in the linked quarter and a 22.7% drop from $1.77 billion a year earlier. The sequential decrease marks a return to a trend in recent years, after the second quarter saw the first increase since the end of 2021.
Total service charges and fees on consumer deposits also fell sequentially to $2.85 billion from $2.91 billion. The drop was largely due to the decline in overdraft fees, as ATM fees and maintenance service charges fell quarter over quarter by 1.4% and 0.7%, respectively.
Service charges and fees on consumer deposits as a proportion of operating revenue also mostly held steady, ticking down to 1.14% from 1.15% in the second quarter.
Banks with the highest proportion of deposit fees
While the proportion of consumer deposit fees to operating revenue declined for the industry overall, some banks depend on that fee income more than others. Service charges on consumer deposit accounts made up more than 10% of three US banks' operating revenue for the 12 months ended Sept. 30.
Woodforest National Bank maintained its top spot on the list, with consumer deposit fees accounting for 22.4% of its operating revenue.
Banks with the most consumer deposit fees
The largest US banks have faced intensifying regulatory and competitive pressures to alter their overdraft practices, leading many to announce changes to their policies since year-end 2021.
As a result, a majority of the banks that reported the most consumer deposit fee income for the 12 months ended Sept. 30 reported year-over-year declines in that income. Among the 20 banks with the most consumer deposit fee income, 11 saw double-digit year-over-year drops.
JPMorgan Chase & Co. subsidiary JPMorgan Chase Bank NA was one of just three banks in that analysis that reported a year-over-year increase, though it was modest at 0.1%. Peers Wells Fargo Bank NA and Bank of America NA posted large year-over-year drops at 21.9% and 25.8%, respectively.
KeyCorp subsidiary KeyBank NA posted the biggest year-over-year decline in consumer deposit fees, as they fell 42.2% year over year. Those fees now make up 1.7% of the bank's operating revenue.