The Branch Dilemma

by Edward O'Brien 0

As banks and other financial institutionsstrive to become more efficient, the topic of branch presence oftencomes up. Many financial institutions are seeking to “rightsize”themselves to consistent profitability.

There are numerous examples of financial institutions that areadding and reducing branches. But there is no clear, universalblueprint for success evident across the board. What is clear isthe fact that overall, the total number of branches has started todecline.

There were 99,540 FDIC-insured branches in the United States atthe industry’s peak in 2009. The latest results available from 2011show there were 98,192, down 1.4% from the peak. Additionally, thenumber of commercial branches is essentially flat (down two-tenthsof a percent), while the number of savings institutions is downabout 10% since its peak in 2006.

Some large banks, like Bank of America and KeyBank, are decreasingtheir branch footprints in some locations, while adding orupgrading branches in other areas that make strategic sense tothem.

Even with the total number of branches trending downward, somefinancial institutions see opportunities in select markets or linesof business with growth potential. Examples of large banksannouncing branch expansion plans in select markets includeJPMorgan Chase, TD Bank, and KeyBank. Chase, in particular, islooking to expand its presence using its branches as a foundationfor expansion in both retail banking and wealth management.

With the expansion of enhanced, next-generation self-servicechannels, particularly ATMs and mobile banking, it’s now possibleto increase the efficiency of the branch channel with fewerbranches in existing markets. Financial institutions then canstrategically expand, as necessary, and leverage branches toencourage richer customer-centric conversations and deeper customerrelationships, often resulting in greater cross-sellopportunities.