U.S. Branch Network Compression
According to first quarter earnings announcements reviewed by First Annapolis, 8 of the top 10 U.S. banks reduced their branch networks in 2012 by an average of 0.4%. This reduction continues a trend started in 2010, when, after almost 20 years of consistent growth in branches, the U.S. banks reduced branches by 1%. Citibank and Bank of America had the largest declines, at -1.3% and -0.9%, respectively. Bank of America’s Banking Center Optimization initiative will result in the closing of 750 branches within the next few years and be a downward drag on industry totals. Bank of America currently has the second largest branch network with 5,651 locations. Wells Fargo holds the number one position with 6,227 branches. JPMorgan Chase was the only bank to add new branches while PNC saw its branch network expand through its RBC acquisition.
Different industry dynamics are driving the contraction of bank branch networks, including a shift in customer preference for self-service channels, but branch closures are primarily a result of the industry’s focus on reducing costs in the post-financial crisis era. It will be interesting to see if branch growth resumes as bank earnings recover or if changing customer preferences and improved technology are driving a long term change in retail delivery strategy.
Figure 1: U.S. Top Banks Branch Network Growth
Source: Company filings
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