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These banks have grown incredibly large in part by leveraging fees for otherwise "unprofitable" accounts. What they're saying is they can't maintain their curre

by mrj 15y ago

These banks have grown incredibly large in part by leveraging fees for otherwise "unprofitable" accounts. What they're saying is they can't maintain their current size without the extra billions of income. They feel entitled to that additional money. Of course, from the outside it sounds just fine if they have to shrink to match their actual deposits.

tsotha 15y ago
What do you mean by "incredibly large"? Revenue? Market cap? Profit? And why do you put quotes around the word "unprofitable"? If you have a buck fifty in your account you're an unprofitable customer, no quotes needed, unless you manage to overdraw your account on a regular basis. Banks are not going to lose money on customers, with the narrow exception of young people they want to develop a relationship with. What will happen if the government doesn't allow high overdraft charges and such is the banks will charge big monthly fees for the privilege of having an account. If the government doesn't allow that they'll simply jettison people without a lot of money.
- ahi 15y ago
  The marginal cost for servicing an account should be roughly 0. There's no reason accounts with 1.50 should be unprofitable if you have updated your tech and business processes. Plenty of services survive with customer values in the fractions of pennies.
  - tsotha 15y ago
    Well, sure, as long as that customer never uses the ATM, doesn't get paper statements, and never talks to a teller. But how many customers are like that?
    - Drbble 15y ago
      These can be easily covered by legally allowed fees.
- mrj 15y ago
  I mean "unprofitable" because they can't make money on $90,000? It's not unprofitable, instead, the bank is inefficient.
  - tsotha 15y ago
    Banks make money by lending. In the current environment they have more reserves than they need to cover the loans they're writing, so the extra goes to the central bank (at least in the US) and makes almost no interest. Of course when the economy picks up the picture changes, but right now they really don't have much to do with the money. It's not that the bank is inefficient, it's that there aren't enough worthy (in the green eye shades sense) borrowers out there. Edit: Yes, I know they make money off of fees, too, but I doubt they collect many fees on accounts with more than about $1k.

by mrj 15y ago

tsotha 15y ago

What do you mean by "incredibly large"? Revenue? Market cap? Profit? And why do you put quotes around the word "unprofitable"? If you have a buck fifty in your account you're an unprofitable customer, no quotes needed, unless you manage to overdraw your account on a regular basis. Banks are not going to lose money on customers, with the narrow exception of young people they want to develop a relationship with. What will happen if the government doesn't allow high overdraft charges and such is the banks will charge big monthly fees for the privilege of having an account. If the government doesn't allow that they'll simply jettison people without a lot of money.

ahi 15y ago
The marginal cost for servicing an account should be roughly 0. There's no reason accounts with 1.50 should be unprofitable if you have updated your tech and business processes. Plenty of services survive with customer values in the fractions of pennies.
- tsotha 15y ago
  Well, sure, as long as that customer never uses the ATM, doesn't get paper statements, and never talks to a teller. But how many customers are like that?
  - Drbble 15y ago
    These can be easily covered by legally allowed fees.
mrj 15y ago
I mean "unprofitable" because they can't make money on $90,000? It's not unprofitable, instead, the bank is inefficient.
- tsotha 15y ago
  Banks make money by lending. In the current environment they have more reserves than they need to cover the loans they're writing, so the extra goes to the central bank (at least in the US) and makes almost no interest. Of course when the economy picks up the picture changes, but right now they really don't have much to do with the money. It's not that the bank is inefficient, it's that there aren't enough worthy (in the green eye shades sense) borrowers out there. Edit: Yes, I know they make money off of fees, too, but I doubt they collect many fees on accounts with more than about $1k.