U.S. Banks’ Dodd-Frank Costs May Widen to $34 Billion, S&P Says

JPMorgan Chase & Co. (JPM) and Bank of America Corp. are among eight U.S. lenders that collectively may have annual pretax profits cut by $34 billion amid new U.S. rules that include limits on trades, Standard & Poor’s said.

The firms’ pretax earnings may drop by a range of $22 billion to $34 billion because of the 2010 Dodd-Frank regulatory overhaul, Matthew Albrecht, a credit analyst at S&P, said today in a statement. He previously predicted $19.5 billion to $26 billion, according to the statement.

“Most of the higher estimate reflects our view that regulators could take a more strict interpretation of the Volcker rule than we previously expected,” Albrecht said. The provision seeks to restrict proprietary trading by banks holding federally insured deposits.

The other firms included in the estimate are Citigroup Inc. (C), Goldman Sachs Group Inc. (GS), Morgan Stanley (MS), Wells Fargo & Co. (WFC), PNC Financial Services Group Inc. (PNC) and U.S. Bancorp. New regulations could cut pretax return on equity by a range of 250 basis points to 375 basis points, Albrecht estimated. A basis point is 0.01 of a percentage point.

To contact the reporter on this story: Laura J. Keller in New York at lkeller12@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

10:15

Aug. 8 (Bloomberg) -- Frank Keating, president and chief executive officer of the American Bankers Association, discusses the impact of scandals and President Barack Obama's remarks on the financial services industry, the importance of community banks and the impact of regulations on bank profitability. Keating, speaking with Erik Schatzker on Bloomberg Television's "Market Makers," also talks about proposals to break up larger banks. (Source: Bloomberg)