The Zacks Analyst Blog Highlights: Bank of America, JPMorgan Chase, Wells Fargo & Co., Visa and Mastercard

Nov 03, 2011, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Nov. 3, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Bank of America Corp. (NYSE: BAC), JPMorgan Chase & Co. (NYSE: JPM), Wells Fargo & Co. (NYSE: WFC), Visa Inc. (NYSE: V) and Mastercard Incorporated (NYSE: MA).

(Logo:  http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Wednesday's Analyst Blog:

BofA Calls Off Debit-Card Fee

Bank of America Corp. (NYSE: BAC) has called off its plan to charge a $5 monthly fee on debit card purchases on Tuesday, but only after a hostile response from consumers and lawmakers nationwide. The company was under pressure to drop debit card fee as some of its rival companies including JPMorgan Chase & Co. (NYSE: JPM) and Wells Fargo & Co. (NYSE: WFC) already took similar actions.

Debit card fees became an industry trend last month after banks started suffering from revenue losses due to the imposition of the debit interchange fee (proposed by the Durbin Amendment) effective October 1. The new federal rules restricted banks' ability to charge merchants whenever a card is swiped.

Consequently, BofA and its peers were gearing up to charge its debit card users, so as to recoup some of their revenue losses. BofA's debit card usage fees would have been applicable to basic accounts starting January 2012.

BofA, the nation's second largest bank by assets, supposedly took this move in response to customer feedback and the changing competitive marketplace.

Now that the mega banks are taking a step back, many other U.S. banks are mulling over calling off debit card fees plans.

What Are Interchange Fees?

For every swipe of a debit card, the related bank charges a fee to the retailer. The bank then shares the amount with its card partners such as Visa Inc. (NYSE: V) and Mastercard Incorporated (NYSE: MA). This charged amount is called interchange fees. On average, banks charge a retailer 44 cents per swipe as interchange fee.

Extent of Revenue Loss

Since October 1, the debit interchange fee provision has capped interchange fees for big banks (with assets of $10 billion or more) at 21 cents per transaction. This represents a decrease of about 52% from the previous average, draining out huge revenues from the industry.

According to the data compiled by Bloomberg Government, the limits on interchange feesmay cut the annual revenues of large U.S. banks by about $8 billion.

The Aim

The Fed's proposal to slash interchange fees was a desperate move to stop large banks from earning super-normal profits. This attempt was backed by the noble intention of infusing this money into the market through consumers, thereby increasing consumption and ultimately fueling economic growth.

In Conclusion

We believe that the main purpose of slashing interchange fees would have been defeated with the imposition of debit card usage fees by banks as the cycle of cost shift would have eventually fallen on consumers' shoulders. A balancing act was much needed to benefit both financial institutions and consumers.

And just when these banks started to have it their way, an outcry from consumers and lawmakers echoed right across the nation. The banks have bowed to the pressures of the people, but whether they will be able to deal with the interchange fees profitably remains to be seen. There must be other ways to recover revenue loss. The sooner U.S. banks figure those out, the better.

Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5515.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leon Zacks. As a PhD from MIT Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Follow us on Twitter: http://twitter.com/zacksresearch

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
http://www.zacks.com

SOURCE Zacks Investment Research, Inc.



RELATED LINKS

http://www.zacks.com