The latest postal rate increase of 9% on first class mail could cost the banking industry upwards of $200 million this year, based on the amount banks spent on postage in 1994.

"It could have been a great deal worse," said Irving Warden, an associate general counsel for the American Bankers Association in Washington.

He noted that although the postage increase - which took effect the first of the year - will be costly, it is less severe than previous rate hikes in that second- and third-class mail is more profoundly affected than is first class, which banks use more heavily.

In addition, the postal changes also include an improved discount tied to presorting and a freeze on the additional-ounce mailing rate.

Both of these provisions help the banking industry, which is widely considered to be the largest source of mail in the nation.

According to ABA figures, banks spent $2 billion on postage in 1993 on 6.6 billion pieces of mail - 6.3 billion of which were first-class.

Banks tend to spend about 2% to 2.5% of their annual operating budget on postage, Mr. Warden said. According to the ABA's 1993 study on postal service, banks with $10 billion or more of assets spent an average of $14.9 million annually on postage.

The Postal Service initially intended to place an across-the-board 10.3% postage increase on all mail classes. But, after a concerted lobbying effort, the final plan raises the cost for first-class postage only 9%. The Post Office made up for the first-class shortfall by placing higher increases on other classes.

The last major hike, in February 1991, raised postage prices 19% for first-class mail.

Although the extra costs may hurt, bankers can find consolation in the knowledge that they avoided $132 million a year in additional expenses when the Post Office decided not to jack up additional-ounce rates by 3 cents an ounce. Close to one-third of all banking mail - 2 billion pieces - is additional-ounce mail.

Also, banks cumulatively stand to save another $10 million this year, since the presort discount - the reduction given for preliminary sorting of mass mailings - was increased from 4.2 cents to 4.6 cents.

So, while the outcome of the most recent rate hike may not be the cause for celebration, bankers can take solace in the fact that they have minimized their losses.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.