Right now football season is in full swing and the holidays are right around the corner.  For banks, however, there seems be little hope of a lot of holiday cheer to look forward to.  Why?

Two words: Earnings. Season. 

In advance of most banks releasing their earnings, The New York Times stated in an article, “For banks, the situation is likely to get worse before it gets better.” 

The scary thing, of course, is that we’ve been saying that for years now.

Chase released its earnings on Friday and posted a 4% profit decline for the third quarter compared to the same quarter of 2010.  This doesn’t bode well for the rest of the industry given that Chase is considered one of the best managed banks in the industry.  Indeed, according to data from Trepp, overall revenue is expected to fall 4% in the third quarter, slipping back to 2005 levels.  Consumers, however, seem to be worse off  - household income has reportedly dipped to 1996 levels, when adjusted for inflation…

The banks, of course, are looking for ways to make up the revenue lost due to new federal regulations.  It’s no secret that banks are attempting to do this by imposing fees on their customers.  Free checking – if it even existed in the first place – has largely been eliminated.  And infamously, Bank of America announced a $5 fee in any month in which a customer uses a debit card. Wells Fargo and Chase have been testing debit card fees for some time.

Consumers aren’t taking these announcements lightly.  One woman – Molly Katchpole – has started a petition asking Bank of America to “stop the debit card usage tax.”  Her appeal isn’t to just Bank of America customers.  She goes on to write, “Even if you’re not a Bank of America customer, this should matter to you. This campaign will show other banks who are planning to follow suit that the public won’t stand for Wall Street’s newest way to take money from its customers — and that they will take their money somewhere else.“  The petition currently has 224,000 signatures and has received TV, radio, online and print press coverage. 

Uh, can you say, “viral?”

Remember Netflix?  Remember when they increased their prices by 60%?  As a result, the company’s stock lost 60% of its value and lost 1 million customers.  The company has also had to backpedal on its plan to split into two services – again because customers were angry.

So what’s a company to do?

Granted, it’s much easier to leave Netflix than it is to leave your bank.  Javelin Strategy and Research estimates that only 7% of consumers will switch banks in 2011.  An article in the New York Times claims that online banking is the reason that customers don’t switch.  But from my perspective, that’s just customers being lazy.  It’s also a pain to move, change email addresses, or change phone numbers, but people do it all the time.  Can you imagine living in the same place your entire life because it’s too much trouble to change your address? 

Perhaps the state of inertia is finally poised to change…November 5^th is “Bank Transfer Day” and a Facebook page dedicated to the day has almost 13,000 “likes.”  Most likely the day needs a few more supporters to make a difference, but combined with Molly’s petition and the Occupy Wall Street protest, who knows what will happen in the coming weeks.

The irony of the situation is that banks developed debit cards as a replacement for paper checks – debit transactions are cheaper than check processing.  Lloyd Constantine – lead counsel in the 1996 antitrust lawsuit against Visa and Mastercard – makes the point that debit transactions are still significantly cheaper than check transactions.  If so, aren’t the banks potentially cutting of their now to spite their face, so to speak?

It’s a free country, so banks can charge what they want for their services.  But I always wonder about the wisdom of punishing the people who keep them in business – their customers. Isn’t there some merit in having Happy Customers?  Surely there’s another way to make money besides charging fees? Until the banks figure this out, expect earnings season to be dismal.