U.S. Bank Not Rushing To Judge Durbin Impact On Revenue

As many banks evaluate how much impact the Durbin amendment that limits debit card interchange will affect revenue, U.S. Bank says it is reserving judgment.

During an Oct. 19 conference call with analysts to discuss the Minneapolis-based bank’s third-quarter earnings, Chairman, President and CEO Richard K. Davis reiterated that the company is not planning to make changes to offset the negative impact of the Durbin rule, which is expected to cost the company $75 million a quarter.

The Federal Reserve Board’s new rate rules (mandated under the amendment), which took effect Oct. 1, essentially cut in half the amount issuers receive in debit card interchange. To determine how to recover 50% of what the bank has lost is “going take all of next year” to figure out, he said.

"We are not going to make a mistake here, and we don't have to" try to earn back the money this quarter or in the first quarter, Davis said. “We will start working our way toward different ways of charging for services that customers are willing to pay for,” he said.

David added: “We've got a great laboratory of watching a number of banks that have been doing the debit fee and we will learn. … We will find out if customers complain and move, or just complain. We will take all that in, and in time we will make our decision."

The bank has recovered 30% of debit-revenue losses, “but it will take the rest of the year to get the extra 20%” to recover that 50%, he said.

U.S. Bank’s wait-and-see approach may be prudent, as Sen. Dick Durbin has been aggressive in criticizing banks that have gone ahead and made fee adjustments.

This week, Durbin is calling out Wells Fargo & Co. to explain why it needs to impose new debit card fees when it posted a 21% increase in third quarter profits (see story).

 Durbin also blasted Bank of America Corp. earlier this month for adding a $5 per month fee to debit card users, saying the move will drive consumers to use credit cards. He advised consumers to switch to community banks or credit unions (see story).

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