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Bank Branches Still Matter Even As They Continue To Disappear

Need for Deposit Growth Will Continue to Ensure Viability of Physical Bank Facilities

Bank branch consolidations have quickened over the last two years as customers continue to embrace digital banking. Simultaneously, the number of new branch openings continues to fall. But it’s all part of a larger shift in how retail branches are being utilized by customers and where those brick-and-mortar institutions need to be located.

Through the first nine months of this year, U.S. banks have closed more than 2,600 branches. That is about 10 percent more than during the same time frame in each of the two previous years, according to statistics from the Federal Deposit Insurance Corp. (FDIC).

At the same time, U.S. banks have opened just 873 new branches this year. That number has steadily fallen each year from nearly 1,300 in the first nine months of 2013.

Over the past five years, the net number of bank branches has decreased by nearly 7,900 locations, representing approximately 19.74 million square feet of closed bank space.

Leading the closures list so far this year are:

  • JPMorgan Chase — 143 closures;
  • Wells Fargo — 138;
  • First-Citizens Bank & Trust — 135;
  • KeyBank — 117;
  • SunTrust — 117;
  • PNC — 114;
  • The Huntington National Bank — 109; and
  • Bank of America — 98.

Most of them show up on the list of banks closing the most branches in the last five years, including:

  • Bank of America — 810 closures;
  • JPMorgan Chase — 712;
  • PNC — 615;
  • Wells Fargo — 526;
  • SunTrust — 392;
  • Capital One — 338;
  • Branch Banking and Trust — 312; and
  • Citibank — 309.

Branches Still Matter

Even having closed more than 140 branches this year and more than 700 in the last five years, JPMorgan (NYSE:JPM) officers were asked this week during the firm’s earnings conference call why they weren’t doing more to trim their 5,200-branch network given that mobile banking was up another 12% year-over-year.

Marianne Lake, chief financial officer of JPMorgan Chase, was quick to answer: “Because branches still matter.”

The fact is branches play a significant role for U.S. banks – they are a cheap source of capital.

Lake continued, “75% of our growth in deposits came from customers who have been using our branches. On average, a customer comes into our branches multiple times in the quarter. I know that all sounds like old news, but it’s still new news or current news, so the branch distribution network matters.”

Still there is no doubt customers’ needs for a physical branch are changing, Lake added.

“We’re not being complacent to the consumer preference,” she said, “We’re building out all of the other sort of omni-channel pieces, as you know, so that we have the complete offering. If the customer behaviors start changing in a more accelerated fashion, we will respond accordingly.”

At Bank of America (NYSE:BAC), customers using mobile have increased 47% in the past 12 months. Mobile deposits now account of 21% of all check deposit transactions, according to Brian Moynihan, chairman and CEO of Bank of America.

“We processed nearly 14 million transactions and the growth continues,” Moynihan said. “We recently processed a half of billion dollars in a single week.”

But, Moynihan added, the deposits of people that walk into a branch can be typically 10 times higher than the amounts people deposited digitally.

“Each day three-quarters of a million people come into our branches, and our teammates serve them well, and our scores at those branches are at all-time highs in terms of satisfaction, and 80% of the sales go on in that space,” he added.

That’s why he noted Bank of America would continue to invest in its physical branch network.

“We have been and we will continue to open centers and markets where you have a strong commercial banking wealth management client base,” he said.

The bank holding company is also refurbishing nearly all its existing financial centers, and has added 2,000 primary sales professionals over the past 12 months, including relationship bankers, financial advisors, commercial and business leaders.

“So what we’re doing is fine tuning the branch account and often consolidating into a bigger branch that we’ve invested heavily into the quality of the branch itself,” Moynihan said.

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