The money that banks derive from a long list of charges has grown sharply in recent years--but the goose may be running out of golden eggs.

Anyone who follows the U.S. banking system knows that fee income has soared in the 1990s, making an important contribution to last year's record profits.

To a large degree, the rise stems from sharp increases in what banks charge their customers, both individuals and small businesses. But is there a limit? Can banks continue raising fees to the extent that they have been?

The answer appears to be no. Aggregate figures supplied by federal regulatory authorities show that the rate of increase in fee income--particularly on deposit accounts--slowed significantly last year.

"Fees on checking accounts have been up substantially in the last few years, but have pretty much held flat in the last six-to-nine months," says Robert McClane, president of Cullen/Frost Bankers in San Antonio.

Moreover, there is growing pressure in Washington to stop the rise in bank fees, or even reduce some of them. Critics have been buttressed by a recent report by the Federal Reserve showing that fees levied by banks and thrifts for bounced checks, overdrafts and certain checking accounts vaulted well ahead of the pace of inflation.

Although fee income is still rising, the rate of increase in the broadest categories--the consumer and small business sectors--has slowed sharply. The rise in trust income also has dropped, but not as much as deposit-generated fee income.

Figures supplied by Sheshunoff Information Services Inc. show that increases in deposit fees slowed dramatically in 1993, rising only 6.73%, following hikes of 9.1%, 12% and 11.35% in the three preceding years.

Increases in trust fees also slacked off from 1992, but to a lesser extent, and it is too early to determine whether the decline in last year's rate of increase truly represents a trend. The 1993 rise in trust account fees amounted to 8.2%, a significant decline from the 10.5% rise in 1992. But last year's 8.2% rise was greater than those in the years 1991 and 1992, when they were 7.3% and 6.5%, respectively.

Meanwhile, there is growing political pressure to rein in bank fees. Several consumer groups have asked the Justice Department to determine whether banks are breaking antitrust laws when setting their various charges.

Bankers respond that the market is competitive because more than 40,000 firms compete for the consumer financial services business. They also reason that price controls wouldn't help consumers very much, although it's conceivable that as the rate of fee increases either stops or slows considerably--as it apparently has--the pressure for controls might abate.

Fee Outpace Inflation

A recent survey by the Federal Reserve, which the consumer groups have used as ammunition in testimony before Congress, shows that 24 of the 44 fee changes by banks and thrifts tracked in 1993 exceeded the annual rate of inflation. Consumer prices rose only 2.7% last year.

"The remainder represented either increases less than the rate of inflation or, in a few cases, fee decreases," Fed Gov. Susan Phillips told a House Banking panel. "These observed changes in fees are similar to those found and reported in earlier years," she added. The survey, conducted annually under a 1989 law, generally covers about 150 banks and 180 savings associations.

Bank fees for bounced checks shot up 24%, to $15.65 a check from $12.62 just five years ago. Stop payment charges on checks rose 18.7 percent, to $12.91 from $10.88. Fees for overdrafts surged 28.9 percent, to $15.54 from $12.06, the Fed study found.

The average monthly fee for TABULAR DATA OMITTED noninterest-bearing checking accounts jumped nearly 45 percent from 1989 to 1993, to $4.81 from $3.32. The number of banks offering such accounts, in which a customer is charged a monthly fee regardless of the balance, has grown, with about 42 percent of the banks surveyed providing them last year, versus 17 percent in 1989.

A Sheshunoff survey for 1989 through 1993 provided similar results. Among the largest increases over that period were fees for insufficient funds, where the charge rose 28% to $16 for the average bank, compared with $12.54 in the earlier period.

Other areas where the increases were 20% or more included stop payment orders, cashier's checks, certified checks and research time.

Fees on commercial accounts also rose sharply. Among the biggest percentage increases were maintenance fees on demand deposit accounts, which were up 26%, to an average of $6.70 a month, and for stop payment orders, which were up 29%, to an average of $13.65.

Perhaps the biggest percentage rise was the fee for outgoing Fed wire transfers, which rose to an average $11.72, from $4.13.

But in at least one area, competition led to a plunge in fees. The average charge for payroll checks dropped to 31 cents, from 57 cents.

Deposits Lag Fees

The trend toward lower increases in fee income on deposit accounts is borne out by statistics on individual banks. Using data supplied by Keefe, Bruyette & Woods Inc. for the years 1991 through 1993, U.S. Banker calculated the difference between the growth in a bank's deposits and its fee income from deposits. (The deposits included were demand, savings and NOW accounts, money market accounts and "other consumer" time deposits. The figures do not include large certificates of deposit or foreign deposits.)

Summit Bancorp in Chatham, NJ, is a good example of the trend. In 1991, the $4.3 billion bank holding company's fee income on deposits grew 11.2% faster than its deposits grew. That difference dropped to 7.5% in 1992, and to less than 1% last year.Some Go Up, Some Go Down 1989-90 1993 Yes No Charge Yes No

Charge Balance inquiry (do you charge?) 21% 78% $1.39 19.60% 80.40%$1.49 ATM Card (do you charge?) 19% 81% $4.35 22.50% 77.50% $0.91 Source: Sheshunoff Information ServicesSelected Fees, 1989-90 versus 1993 Averages of charges for all banks 1989-90 1993 Average Average Difference

PERSONAL Nonsufficient funds (per item charge) $12.54 $16.00 28%Overdrafts $12.20 $14.57 19%Stop payment $10.71 $13.67 28%Cashiers check for customers $2.44 $3.00 23%Money order for customers $1.60 $1.90 19%Certified check (min fee) $5.09 $6.42 26%Research time (per hour) $13.16 $15.94 21%Safe deposit box (10x10) $66.64 $70.23 5%Credit card annual fee $16.07 $16.72 4%Check printing markup (%) 23% 23.79% 3%Reg. Chkng Acct -- Highest fee $5.33 $5.95 12%Economy checking, monthly fee $2.55 $2.94 15%NOW acct, highest monthly fee $6.61 $7.49 13%

COMMERCIAL Maint. fee, DDA $5.31 $6.70 26%Charge per check paid $0.11 $0.12 9%Charge per deposit $0.13 $0.14 8%Charge per check dep. (not encoded) $0.04 $0.05 14%Charge per roll of coins $0.02 $0.02 16%Charge for stop payment order $10.57 $13.65 29%Charge for incoming drafts $5.91 $7.16 21%Charge for outgoing Fed wire trans. $4.13 $11.24 172%Payroll, charge per check $0.57 $0.31 -46%Payroll, min monthly charge $35.64 $38.18 7% Source: Sheshunoff Information Services

At Cullen/Frost, the change was even more dramatic. The difference in growth of fee-from-deposit income and growth in deposits dropped from 17.5% in 1991 to 12.2% in 1992 and showed a decline of 3.46% last year.

There is one possible caveat to the apparent slowdown in fee income growth. As Cullen/Frost's McClane points out, in low interest-rate periods such as we're experiencing now, many businesses prefer to pay for bank services by holding higher levels of demand balances at their banks instead of paying directly for the services with fees.

As a result, some of the deposit growth would be in lieu of fees. At Cullen/Frost, for example, demand deposits rose 24.6% in 1993, compared with a 19% rise in the total amount of deposits included in the U.S. Banker survey.

But clearly, it would seem that the biggest gains in fee income are over--at least for the foreseeable future.

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