America's biggest banks are closing hundreds of branches
(Bank branches in the old days.Dreamworks/"Catch Me If You Can"/YouTube) America's biggest banks are closing hundreds of branches.
Bank of America, Citigroup and JPMorgan shut 389 branches since the third quarter of last year.
Bank of America, which had over 6,000 branches before the financial crisis has now shrank to 4,629, according to third quarter accounts. The bank has cut 112 financial centers from last year.
Paul Donofrio, CFO of Bank of America, said the closing of branches was part of a "shift to self-served digital channels, mobile, online, and ATM" in a 3Q earnings call transcript.
According to the 3Q earnings report, the bank has 21 million mobile banking active users and 18% of deposit transactions are completed through mobile devices. "That’s better for customers, it’s also better for our shareholders," said Donofrio. "It’s one-tenth the cost of walking into a branch."
"So it’s a quality versus quantity and making sure we understand," said CEO Brian Monihyan on the earnings call. "I’d say we went from seven million visits probably four to five years ago to six to five. But those five are of a higher quality, and we think that’s important."
There are less bank branches, but the ones that stand reflect changing customers' behaviors. As consumers opt to go online for transactional services like check deposits, bank branches now emphasize more value added services that "you just have to do face to face" and are adding more mortgage and investment specialists. They are becoming a place to come for advice according to life events - mortgages, investments, saving for college.
(REUTERS/ Brendan McDermid) And the cuts aren't just in terms of bank branches but also in headcount. Bank of America indicated back in June that it planned to cut over 8,000 jobs from its consumer banking division. According to retail banking head and consumer banking co-head Thong Nguyen at a June conference, this is part of a broader cost-cutting and resource reallocation program to meet with consumers' changing banking habits.
Bank of America isn't the only bank to restructure its branches. When Citigroup announced its third-quarter earnings last Friday, October 14, it revealed its branch count has shrunk 7% in North America from the third quarter of last year and is down 116 banks globally to 2,679.
"We have spent the last several years reshaping our branch network, upgrading technology and deepening our focus on our core six markets, enabling us to grow revenues while reducing expenses and significantly improving the profitability of our retail bank," Citigroup CFO John Gerspach said on the 3Q earnings call.
Earlier this year, Citi Global Perspectives and Solutions (GPS) produced a report that found that banks are quickly approaching their "automation tipping point," and they could soon reduce headcount by as much as 30%.
"Banks' Uber moment will mean a disintermediation of bank branches rather than the banks themselves," the report said.
"Specifically, it will mean the shift to mobile distribution being the main channel of interaction between customers and the bank," the report reads.
(A man walks past a Citibank ATM in Los AngelesThomson Reuters) That means that there will be less need for bank branches, and the people who work inside them.
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