Goldman estimates impact of CFPB’s late fee rule on big banks’ earnings (NYSE:PNC)

Goldman Sachs Equity Research estimated on Tuesday the impact of potential lost revenue for large, card-exposed banks after accounting for the Consumer Financial Protection Bureau’s final rule to cap credit card late fees to $8 from $32.

“We expect large cap banks to take actions to mitigate the impact of lost revenue from late fee reduction that could include 1) an increase in APRs on new balances, 2) changes to sharing arrangements with retailers, and 3) the potential introduction of account maintenance fees, amongst others,” analyst Richard Ramsden wrote in a note.

The changes on late fees are estimated to have an average -2.4% EPS impact in 2025, the note said, on large banks with no mitigation. With 50% mitigation on lost revenue from the late fee reduction, the EPS impact would be 1.2%, on average.

Citigroup (NYSE:C) is expected to suffer the most from the legislation, with a 6.4% estimated 2025 EPS impact, while PNC Financial Services Group (NYSE:PNC) is expected to be least affected at -0.7% estimated 2025 EPS impact. Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC) JPMorgan Chase (NYSE:JPM) and U.S. Bancorp (NYSE:USB) were also in the mix.

Some affected firms have already come out with their own projections. Credit card issuer Synchrony Financial (NYSE:SYF) said the rule, which is expected to go into effect 60 days after publication in the Federal Register, will reduce its 2024 EPS by $0.15-$0.25.