Consumer deposit fees declined in the final quarter of 2017 in the U.S. banking industry, as banks took steps to maintain funding levels amid heightening competition for deposits following several interest rate hikes.
Across the industry, 2017 fourth-quarter fees totaled $4.29 billion, down from $4.59 billion in the linked quarter. The latest quarterly level represents the lowest industry total since the second quarter of 2016.
Overdraft fees, the largest category, declined to $2.79 billion from $3.04 billion. The 2017 fourth-quarter overdraft total was the lowest since the first quarter of 2017.
As a percentage of operating revenue, at 2.22%, fees were the lowest they have been since the industry began reporting total service fees in the first quarter of 2016.

Chris Nichols, chief strategy officer at Winter Haven, Fla.-based CenterState Bank Corp., said in an interview that banks of all sizes saw heightened competition for deposits late in 2017, as the effects of three Federal Reserve rate increases last year worked through the financial system and depositors in significant numbers began shopping around for higher rates.
As 2017 wore on, he said, more banks started taking steps to keep their prized customers — or attract new ones — by waiving some fees. For example, he said, many banks that charge fees if customers do not maintain a minimum deposit balance in each account began allowing customers to pool multiple accounts together to meet minimum balance levels and avoid fees. So, for example, if there were a minimum of $1,000 that a depositor needed to maintain to avoid a fee, that customer could have $700 in one account and $300 in another, and by counting the two together, the customer avoids a fee.
Steps such as this likely factored into the 2017 fourth-quarter fee decline, Nichols said. And the moves reflect banks' desire to maintain strong low-cost deposit bases. He said banks would rather give up a little on fees now in order to have robust deposit levels to fund loan growth in the future.
"We are starting to feel more pinch as far as deposit pressure," Nichols said.
Bank of America NA reported the highest service fees on consumer deposit accounts in the fourth quarter of 2017, with $777.0 million in total charges, largely reflecting its status as among the biggest banks in the country. It also posted strong consumer deposit growth in the 2017's final quarter.

A Bank of America spokesperson did not respond to questions for this article. But during the parent company's 2017 fourth-quarter earnings call in January, CFO Paul Donofrio noted that BofA's consumer bank grew deposits on an annual basis by 8%, or $48 billion.
Fourth-quarter maintenance service charges at BofA rose by $20 million from the previous quarter, hitting $282 million. But total deposit service fees were down $4 million, due in large part to a drop in overdraft fees of $19 million. That reflected a change in overdraft policy at BofA that eliminated certain fees.
Maintenance service charges include periodic fees levied on consumer deposits, typically on a monthly basis. These can include fees that are waived but may be subject to charges if the account holder fails to maintain specific minimum balances or other requirements.
While banks prize their core deposits, that does not mean some are not willing to part with depositors who typically maintain low balances. In January 2018, for instance, BofA canceled a previously free online-only checking account it offered to customers between 2010 and 2013. These accounts were not subject to maintenance service fees, but they will now be subject to a $12 monthly fee unless account holders maintain a regular direct deposit of at least $250 a month or a minimum daily balance of $1,500.
At the other two national consumer banks, 2017 fourth-quarter deposit account fees also were down. At Wells Fargo Bank NA, deposit account fees were down $39 million quarter over quarter, and at JPMorgan Chase Bank NA fees were down $263 million.
The notable decline at JPMorgan was due largely to a drop in overdraft fees of $215 million. The decrease was significant enough that JPMorgan's total fees in the 2017 fourth quarter were less than just overdraft fees in the third quarter: $520 million in total in the fourth quarter, versus $548 million in overdraft fees in the linked quarter.
A JPMorgan spokesperson did not respond to a query seeking a specific explanation for the overdraft drop. But following a particularly high level of overdraft fees in the third quarter, many depositors previously stung by fees possibly took steps in the final quarter to avoid repeats.

Did you enjoy this analysis? Click here to set up real-time alerts for data-driven articles on the U.S. financial sector. Commercial banks, savings banks, and savings and loan associations report service fees from consumer deposits in schedule RI of the call report. Click here to see the aggregate data for U.S. commercial banks (scroll to the bottom). Click here to access an Excel template showing the keyfields used to pull the list of companies with the highest service fees-to-operating revenue ratios in the fourth quarter of 2017. |

