Ever since the government's bailout of the banking industry nearly four years ago, the love-hate relationship between banks and their customers has stayed at a fevered pitch. After a series of moves designed to punish customers in the name of improving profits, banks may finally be getting the message that enough is enough.
JPMorgan Chase (JPM) recently announced that beginning next month, it will stop charging overdraft fees for purchases with debit cards that are $5 or less. But as a CNNMoney article pointed out, the bank made this fee-cutting move as part of a class action settlement with customers who alleged that overdraft fees were excessive.
Nickeled-and-Dimed (and $34-ed) to Death
Overdraft fees are just one way that banks have tried to recoup some of their lost income in the wake of the financial crisis, and the consumer protection reforms that followed it. Banks have cut back on rewards for using credit and debit cards, and pushed harder for customers to pay for expensive payment-protection plans. They've also made it harder to qualify for fee-free checking accounts, and raised fees on certain services.
But overdraft fees are particularly egregious, especially in the context of tiny payments. Overdraw your account even by $5 and you'll have to pay a $34 fee -- and no matter how small additional overdrafts may be, you can end up paying several times and owing far more in total fees than the amount you actually overdrew your account.
Just don't pay!
Paying bank fees unnecessarily is a major drain on your budget, but you can stop them pretty easily if you put your mind to it. Because no bank is paying very high interest rates right now, choose your bank based on avoiding fees, looking for banks that offer convenient in-network ATMs and branches to keep you from having to use high-fee alternatives to get at your cash. Similarly, stick with simple accounts and make sure that you never go below minimum balances to avoid monthly account fees.
As nice as it would be for banks to treat you better out of the kindness of their hearts, that's not going to happen. You really have to watch out for yourself if you want to keep banks from earning more than their fair share of profits on your money.
Under Duress, One Big Bank Finally Starts Treating Customers Better
BOK (BOKF) is the smallest bank on the list with a $3.8 billion market value and $26 billion in assets. The bank holding company is based in Tulsa, Okla., but its branches operated under several names in other states: Bank of Albuquerque, Bank of Arizona, Bank of Arkansas, Bank of Kansas City, Bank of Oklahoma, Bank of Texas and Colorado State Bank and Trust. BOK is worth about 12.5 times earnings and is valued at 1.3 times book value. The return on equity is 11%, and it offers a 2.7% dividend yield to the common holders. Shares are trading around $56.00, and Wall Street analysts have a target above $59.00.
KeyCorp (KEY) is the one exception in our list to our rule about share prices under $10. Its other metrics more than make up for this. It has a market cap of just $7.12 billion against some $87 billion in assets. It operates in 14 states throughout the Rocky Mountain, Northwest, the Great Lakes and Northeast regions. To make its appearance on this list even more impressive, KeyCorp is headquartered is in Cleveland, where a large number of now-troubled loans were issued. The bank has a return on equity of 9.2% and pays out a 2.7% dividend yield. Shares trade around $7.50 but have a target price of $9 from Wall Street.
PNC (PNC) is based in Pittsburgh and has almost $300 billion in assets, with over 2,500 branches and almost 7,000 ATMs in 14 states. It has a market cap of $31.01 billion, and its stock is valued at 10.6 times earnings and at less than 0.9 times book value. The return on equity is 8.9%, and the company pays out a 2.73% dividend. Shares are trading at under $59, but Wall Street is eyeing a price of $70.50. PNC was even strong enough financially to close its National City acquisition at the end of 2008 when there was so much fear in the financial markets. PNC also owns almost a quarter of the great asset-management firm BlackRock (BLK).
M&T Bank Corporation (MTB) is based in Buffalo, N.Y., and now has more than $79 billion in assets. Excluding any small purchases made recently, M&T had nearly 700 branches, 2,000 ATMs and a presence in eight states. The market cap is $10.12 billion, its P/E ratio is 12.7, and its price-to-book value ratio is only 1.07. M&T has a return on equity of 9.5% and pays out a dividend of 3.5% to common stockholders. The stock is trading just north of $80 a share, but analysts have set a target price of about $90. Berkshire Hathaway owns almost 5.4 million M&T Bank common shares worth more than $400 million.
U.S. Bancorp (USB) is often overlooked as a money-center bank because it is a super-regional located in Minneapolis. But it's the fifth-largest commercial bank in the United States and caters to millions of consumers. With $341 billion in assets, more than 3,000 branch locations and more than 5,000 ATMs, its operations are spread out over 25 states in America. Berkshire Hathaway owns some 69 million shares worth more than $2.1 billion. The bank's market cap is $59 billion. It is worth about 10 times earnings and 1.6 times book value. The return on equity is very high at 16%, and it offers a 2.5% dividend yield to the common holders. Shares are trading around $31.50, and Wall Street analysts have a target of about $34.25 on this great, safe bank.
Despite the media attention surrounding the JPMorgan's (JPM) multibillion-dollar trading loss, the firm is still in good shape compared to many of its peers. It has a fortress-like balance sheet with about $2.3 trillion in assets, and CEO Jamie Dimon has said the only thing that could lead to the bank's failure is a collision of the Earth and Moon. Despite a share price decline following news of the "London Whale" trading loss, the company still has a sizable market cap of $135.17 billion. Shares trade at less than 8 times earnings and only about 0.7 times book value. The return on equity is 9.8%, and the company pays a dividend yield of 3.4% on the common stock. While the bank shares are trading at just over $36, analysts value the company at $47 a share.
Wells Fargo (WFC) is the undisputed safest bank in America now that JPMorgan Chase & Co. (JPM) has come under scrutiny -- even if Chase has about $1 trillion more in assets. With some 6,200 storefront branches, more than 12,000 ATMs and an asset base of over $1.3 trillion, it has a presence in almost every state. Warren Buffett's Berkshire Hathaway owns close to $13 billion worth of the common stock, and his stake keeps rising. The market cap is a whopping $171 billion. The shares trade at less than 9 times earnings and at almost 1.2 times book value. The return on equity is just above 12%, and it offers a 2.7% dividend yield to the common holders. While shares trade at around $32.50, Wall Street analysts value the bank at almost $38 per share.
Motley Fool contributor Dan Caplinger always watches out for his money. He doesn't own shares of the companies mentioned. You can follow him on Twitter here. The Motley Fool owns shares of JPMorgan Chase.