JPMorgan Sees Clients With Less Than $100,000 Unprofitable

There is a fair amount of regulatory posturing happening here; the Durbin Amendment to Dodd-Frank, that regulates various consumer fees, is still being written into implementation.<p>What is not being said is:<p>1. We are in an abnormally low and compressed rate environment. As those numbers go back up smaller deposits will become profitable.<p>2. Small deposits turn into big deposits as customers age - this is the rationale behind college checking accounts.<p>3. The banking infrastructure is a largely fixed cost. I don't know how they accounted to $100k, but I'd you wanted to inflate the number one could ignore the fact that the variable cost of most customers is virtually non-existent at the margin.<p>4. You can just charge fees to customers below $100k to make them profitable. Checking accounts are historically cheap, in real terms.

It does make sense to me. How much do they make on small transactions and how much does human intervention cost? These firms have tons of internal overhead too.<p>A customer with 100mm is possibly only 10x as hard to serve as one with 100k.<p>I suspect the endgame is 100 pct automated services for most of the market. This won't be provided by the big firms who struggle to get my credit card and checking account on the same screen.

My first instinct was that 100k is a ridiculously high number, but then I checked <a href="http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield" rel="nofollow">http://www.treasury.gov/resource-center/data-chart-center/in...</a> - rates for three year treasuries are only 0.41%. That would yield ~ $410 not including significant interest rate risk. Fun times.

I know the gut reaction is that it is unbelievable that someone with $50,000 isn't "worth" having as a customer, but there are 2 things to consider:<p>1) JPMorgan is saying that future regulation is what is driving those customers to be unprofitable.<p>More importantly:<p>2) For someone making business decisions, it is important to really look at your customers to determine which are profitable. There is a consistent flow of stories from startup founders about the dangers of trying to satisfy every customer.<p>This should be an example of a calculated way a company looks at their profitability and customer mix responsibly and with careful analysis rather than gut feel.<p>*As a caveat, we don't really know whether those customers would be unprofitable or not, and JPMorgan may be making a political statement about future regulation through their financial documents.

One thing I've been struggling to understand: unless you're using JPMorgan to manage your money, why would you leave more than $5-10K in a bank checking/savings account over a discount brokerage account (Fidelity, Scottrade)?

These banks have grown incredibly large in part by leveraging fees for otherwise "unprofitable" accounts. What they're saying is they can't maintain their current size without the extra billions of income. They feel entitled to that additional money.<p>Of course, from the outside it sounds just fine if they have to shrink to match their actual deposits.

We see this in the UK too, people getting upset about overdraft fees pressuring politicians to change the rules. The thing is, I like overdraft fees. I like this idea that the irresponsible fund free banking for the others - one of the very few occasions in economic or political life that this happens. The alternative is a monthly fee for everyone.

Everytime a debit card is swiped they get a cut, so its hard to take this seriously.