WSJ: JPM to Charge Deposit Fees
The Wall Street Journal wrote yesterday, "J.P. Morgan to Start Charging Big Clients Fees on Some Deposits." (It also writes in its "Heard on the Street" column today, "J.P. Morgan Shows Why It Pays to Turn Money Away.") The first article says, "J.P. Morgan Chase & Co. is preparing to charge large institutional customers for some deposits, citing new rules that make holding money for the clients too costly, according to a memo reviewed by The Wall Street Journal and people familiar with the plan. The largest U.S. bank by assets is aiming to reduce the affected deposits by up to $100 billion by the end of 2015, according to a bank presentation Tuesday morning The move is the latest in a series of steps large global banks have been discussing in recent months to discourage certain deposits due to new regulations and low interest rates. J.P. Morgan's steps are among the most detailed and widespread. Specifics are likely to be unveiled Tuesday by J.P. Morgan executives at the bank's annual strategy outlook with investors, these people said. Among other points, the bank is expected to stress alternatives customers affected by the deposit moves can use for their excess cash. The plan won't affect the bank's retail customers, but some corporate clients and especially an array of financial firms, including hedge funds, private-equity firms and foreign banks, will feel the impact, according to the memo. The bank is focusing on around $200 billion of certain "excess" deposits from financial institutions out of $390 billion of total financial institutions deposits, according to the presentation. J.P. Morgan is making the moves because certain deposits are less profitable to handle than they used to be. New federal rules essentially penalize banks for holding deposits viewed as prone to fleeing during a crisis or a stressed environment.... The Wall Street Journal reported in early December that J.P. Morgan and several other banks, including Citigroup Inc., HSBC Holdings PLC, Deutsche Bank AG and Bank of America Corp., had spoken privately with clients in recent months that new regulations are making some deposits less profitable, in some cases telling clients they would charge fees or work to find alternatives for some of the deposits." The Journal's second piece comments, "Heavy capital charges triggered by deposits that can only fund low-yielding, safe assets are a recipe for slimmer margins and low returns. So it is no wonder J.P. Morgan, which figures it can shave a half a percentage point off its capital surcharge with the move, wants to shed these deposits. For bank investors, this reinforces that Fed interest-rate increases can't come too soon. Without them, margins are likely to remain under continued pressure. Unfortunately, the Fed's long-awaited move on rates may take more time to play out than many investors are hoping for. Cash moved out of nonoperating deposits will most likely move into money-market funds, short-duration bond funds and individual securities."
