Citicorp raising its fees to generate more income

December 27, 1990|By Dow Jones News Service

NEW YORK -- Hard-pressed Citicorp is raising the fees it charges for a wide range of services such as money transfers, part of an accelerating trend among banks to generate additional fee income from consumers and small-business clients.

Most of the new Citibank charges that take effect Tuesday are sizable increases from the last time fees were changed in 1988. The fees for 11 of the 19 miscellaneous items on one schedule climb by 25 percent or more. They include the charges for a check returned or paid against insufficient funds, to $12 from $9.50, and for a stop-payment request, to $15 from $12.

Some percentage increases are much higher. The charge for a domestic money transfer goes to $20 from $12, and the fee for large checks drawn on foreign banks will be $30, up from $13.

Banks across the country are "desperate" for more income as they seek "to offset declines in loan volume, the loss in earnings from non-performing assets and the anticipated loss in earnings from paying higher deposit insurance fees," said Edward Furash, who heads a bank consulting business, Furash & Co. in Washington. Mr. Furash said banks are not under as much pressure in 1990 as they will be next year to find additional sources of income.

In addition, the profit margin on traditional interest income has been shrinking. In the five years ending in 1989, Sheshunoff & Co. of Austin, Texas, found that the net interest margin declined 9.8 percent, while non-interest income rose 34 percent. Jack Jacobs, senior vice president, said that most of the gains were by large banks for "non-repeat business, such as leveraged-buyout loan fees," which have sharply dropped.

Mr. Jacobs said he expects more banking companies to raise fees across the board as income from buyout fees diminishes and insurance-fund assessments rise.

Citicorp has been under particular pressure. Last week, it said it would post a fourth-quarter loss of $300 million to $400 million, stemming largely from an increase in commercial loan-loss reserves and the costs of shrinking its work force about 8.5 percent by the end of 1992. Management is also seeking to slash the company's dividend.

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