-
Huntington Bancshares CEO Stephen Steinour is challenging rivals to double down on free checking or abandon it. The bet's simple: less revenue now for more customers later.
May 9 -
Bank of America is changing the fee structure for some checking products. This month, the company will raise the monthly fee on its MyAccess checking account to $12 from $8.95.
May 5 -
U.S. Bancorp is falling in line with other big banks that have recently replaced their free checking product with one that has some fees attached.
May 4 -
On June 3, the Winston-Salem, N.C., company's Free Checking account will become Bright Banking, an account that will carry a monthly maintenance fee of $10.
April 14 -
TD Bank's redesigned checking lineup is widely varied but has a common thread — for five of its six new accounts, paper statements can cost a dollar a month.
March 15
Huntington Bancshares Inc. on Tuesday offered a glowing six-month progress report on its closely watched campaign to win business by not raising fees, but market watchers gave it a B-plus pending final exams.
Sales of checking accounts to new customers rose more than expected, as did cross-sales at the Columbus, Ohio, company's 650 branches across the Midwest. So called fair-play banking is already paying for itself and recouping revenue lost from consumer overdraft fees that regulators have blocked, Huntington executives said at a conference in New York.
Still, do not expect other big banks to start embracing free checking or 24-hour grace periods on overdraft charges — the two pillars of Huntington's contrarian strategy to grab market share.
Why not?
Interest rates are low. People and businesses are saving more. Increasing deposits is like swimming with the current right now, experts say. Banks that have been eliminating free checking are boosting deposits, too.
It is impossible to discern exactly how many of the 36,000 new households that Huntington has sold checking accounts in the last six months were won over by its no-new-fees marketing blitz, market watchers say. There is also no accurate way to gauge how well a bank is at cross-selling, because every bank tracks it differently. Some banks count debit cards attached to a checking account as a cross-sale; others do not.
Also, there is a difference between a new deposit and a lucrative deposit. It will be at least another year before Huntington can show whether the former became the latter, experts say.
"Huntington is definitely making some good strides. … I don't want to minimize the work that they're doing," said Scott Siefers, a managing director that covers large banks for Sandler O'Neill & Partners LP. "The real proof will be the point at which deposits start leaving the system, when rates go up and people start being concerned about yields. If they are able to grow them at that time or retain deposits, that will be when we know more definitively" that the bank's strategy has paid off.
Fred Cummings, a banking analyst and president of Elizabeth Park Capital Management Ltd., agreed.
"This clearly is some validation for it, but you want to see how sticky these new accounts will be," he said. "Huntington is clearly getting some traction."
"Everybody has got their own strategy in terms of how they want to go to market and deal with the new realities of overdraft fees being lower and interchange fees potentially being lower," Cummings added. "I don't know if people will follow them per se."
At the UBS Global Financial Services Conference in New York, Huntington executives offered a slew of statistics that, they said, shows the bank's approach is paying off.
Since it began giving depositors 24 hours to cover overdrafts in September, Huntington's sales of multiple products to individual customers have accelerated in the last six months. Nearly 71% of households with checking accounts buy three or more additional Huntington products; six months ago, nearly 69% did.
A $9 million, or nearly 4%, gain in consumer revenue in the first quarter put the fair-play strategy on track to recoup the $24 million of revenue Huntington said it would lose because of its more lenient overdraft program. It is also offsetting the impact of deposit fees blocked by new banking rules, which Huntington said last year would cost as much as $45 million a year in revenue.
"It's working," said Mary W. Navarro, Huntington's senior executive vice president and director of retail and business banking. "We're being rewarded for it."
She said its market share gains should only increase in the next phase: Two new checking accounts it unveiled this week that will eliminate the six checking products it used to offer. One of the new accounts is a free account that does not have any hidden fees or minimum balance requirements, the bank says. It makes Huntington one of the only big banks to still offer free checking with no strings attached. It also launched an interest-bearing checking account that carries a $15-a-month charge, unless the balance exceeds $15,000.
Sean Payant, executive vice president of consulting services for Haberfeld Associates, said Huntington seems to be winning more checking account customers, which positions its well to increase sales as the economy improves. Its streamlined deposit offerings could be another boon, he said.
"Everything starts with the checking account. You've got a lot of banks complicating their products and service offerings," Payant said. "I think simplifying is great. You'll get into a bank and they have way to many offerings. I think the fact that they still have a free account is a huge marketing advantage for them."
