Chase Manhattan Corp., flexing its muscles in the hotly competitive New York consumer market, has unveiled an across-the-board reduction in account balance requirements.
The cuts, announced Tuesday, provide a glimpse at how the "new" Chase plans to use its heft to attract customers and challenge its biggest hometown rival, Citicorp.
"Chase has some opportunity to exercise some pricing leadership," said Les Dinkin, a Westport, Conn.-based banking consultant. "They're giving the customer much greater value."
Chase, the nation's largest bank as a result of its March merger with Chemical Banking Corp., said the new product lineup reduces 11 different Chase and Chemical accounts to four and results in "overall cost savings to customers."
The bank reasoned that since customers will now find it easier to meet the balance requirements, they will also have an easier time avoiding fees for maintaining the account.
The Chase announcement comes half a year after Citicorp, the country's second-largest bank, eliminated fees on a wide range of services.
"It's a metro New York market price war," said Edward E. Furash, a Washington-based consultant. "The banks are fighting it out for market share as the market begins to consolidate."
Citicorp announced in January that it would eliminate fees for stop- payment orders, bounced checks, check overdraft protection, notary services, consular letters and bond coupon redemptions. Citicorp had wiped out its electronic banking fees the previous June.
Russel Herz, Chase's senior vice president for product management, downplayed the competition with Citicorp but acknowledged that the balance reductions are designed "to attract more customers."
"There have been a couple of banks reducing fees," Mr. Herz said. "We're the first bank to reduce minimum balance requirements."
Under the new pricing schedule, balance requirements for interest- bearing checking accounts at Chase will fall from $7,500 to $5,000, and for regular checking from $5,000 or $6,000 to $3,000.
"We have no competitor that's giving a NOW interest-bearing account and a regular checking account at the same minimum balance," Mr. Herz said.
Chase also will offer a "self service" account in which customers can avoid fees by conducting their banking via telephone, personal computer, or automated teller machine.
The company said customers of the pre-merger Chase would see their below-balance transaction fees reduced by 33%.
The reductions come as the new powerhouse prepares to merge established Chase branches with those of the former Chemical Banking Corp., an event slated for the Labor Day weekend.
Mr. Dinkin, who heads NBW Consulting Group, said the lower balance requirements reflect an "aggressive pricing posture" on the part of Chase.
"They feel there's a competitive opportunity to use the lower balances to retain customers as they work through the integration of the two branch systems," he said.
Citicorp spokeswoman Susan Weeks said her bank did not feel threatened by the Chase move. "We think our customers for the most part look at the total value they're going to get from their bank, and it's not always driven by balance requirements. It's driven by the set of packaged services they get and the values they place on those services," she said.
Mr. Furash, the Washington consultant, said the price war in New York is occurring at a time when banks in most other areas of the country are opting for "value pricing," accounts in which various services are packaged under one price.
"That doesn't necessarily mean lowering pricing in traditional terms," he said.
Mr. Furash identified three factors behind the intensified price war in New York: a larger-than-usual number of consumer activists agitating for lower banking fees; elected officials who respond to those forces; and the numerous mergers that recently took place in the New York region.
"You've got these mergers and realignments and everyone is scared to death about losing market share," Mr. Furash said.
Citicorp's Ms. Weeks said New York has always been "very competitive" for the larger banks. "We've always looked at what the competition is doing. But it's not always price-driven," she said.