SOURCE: The Bedford Report

The Bedford Report

November 18, 2011 08:16 ET

BofA and Citigroup Forced to Cut Jobs as Consumers Prevent Minor Rate Increases

The Bedford Report Provides Equity Research on Bank of America & Citigroup

NEW YORK, NY--(Marketwire - Nov 18, 2011) - Amidst a firestorm of customer backlash, US banks of all sizes are backing off the new monthly fees. Banks began instituting monthly fees in response to last year's Dodd-Frank legislation that limited the amount of money banks could charge merchants for individual transactions. Banks skirted the legislation by charging a flat monthly fee to use debit cards in order to recoup some of the losses. The Bedford Report examines the outlook for companies in the Money Center Banking industry and provides equity research on Bank of America Corporation (NYSE: BAC) and Citigroup, Inc. (NYSE: C). Access to the full company reports can be found at:

www.bedfordreport.com/BAC

www.bedfordreport.com/C

Moving forward, the move to drop monthly debit card transaction fees will certainly help the public image of regional banks. However, regional banks can ill afford further revenue stream losses and need to find new ways to generate capital. Bill Hardekopf, CEO of LowCards.com, stated that "banks are still losing billions of dollars in revenue from the interchange fee regulations."

In addition to charging fees to use debit cards, many banks added or increased fees for checking accounts and raised amounts customers must have in those accounts to avoid such fees.

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Earlier this month Bank of America abandoned plans to charge $5 a month for debit cards after a nationwide backlash from consumers and lawmakers. Bank of America CEO Brian Moynihan had defended Bank of America's earlier plans, arguing that the debit-card fee would encourage customers to use more services with the company so they'd be exempt. BofA declined to comment on how many had closed their accounts after the original announcement, but sources close to the bank to The New York Times that account closures were higher than usual.

Unable to hike rates, major banks may be forced to cut staff to preserve margins. Citigroup is considering plans to cut 3,000 or more workers as part of an ongoing effort to control expenses. About 900 of the cuts would be in the company's securities and banking division, which serves institutional clients. The rest would be spread throughout various departments.

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