Huntington mostly closing in-store branches since TCF deal announcement

Since announcing a transformative acquisition, Huntington Bancshares Inc. has focused its branch closures on in-store locations, mostly in Ohio.

Huntington announced its $6.0 billion acquisition of TCF Financial Corp. in December 2020, and the Columbus, Ohio-based regional bank has closed 29 branches since then. It does not appear the branch closing strategy has yet aligned with the pending acquisition of TCF, with just four of the 29 branches within a two-mile radius of a TCF branch. Most of the closures were within two miles of a Huntington branch, and more than half — 17 of the 29 closures — were in-store branches.

The shift away from in-store, which are limited-footprint branches often inside grocery stores, appears to be part of a broader strategy for Huntington. During the bank's Jan. 22 earnings call, CEO Stephen Steinour said the bank will exit its relationship with Meijer, a Michigan-based grocery chain. The bank also has a relationship with Giant Eagle, another grocery chain, which Steinour said will continue, but the bank will look to close certain locations over time.

"We've been well-served by the nature of the economics around the in-store branches, but there is a changing distribution, frankly," Steinour said, according to a transcript. "As we've seen over the past year with the pandemic, more and more home goods [are being] delivered, including groceries."

At the same time, Steinour said TCF has had some success with in-store branches in denser metropolitan areas, and he said the bank is committed to the Giant Eagle partnership "for the next several years."

Banks have been shuttering branches for years, and several banks have said they are accelerating their closure plans due to the COVID-19 pandemic. Fear over visiting the branch during the pandemic, or fewer branch hours due to the pandemic, have forced digital adoption upon customers who had been resistant.

In-store branches provided banks an affordable location to attract new accounts and provide customers a convenient location to complete transactions. But with the advent of digital banking, institutions are increasingly pushing customers to complete transactions digitally at an even lower cost. That has reduced the value of the in-store branch, said Simon Powley, head of banking advisory services for Diebold Nixdorf, which specializes in retail banking solutions.

"Traditionally, in-store locations have been more transactional than fulfilling complicated product sets," Powley said in an interview. He said the so-called death of branches has been overplayed as consumers still want to have a location to visit for major financial decisions. But customers are less likely to want to open an account or discuss retirement planning inside a grocery store.

"Customers are just not as comfortable sitting down and having a complex conversation in those locations as they are in an office or branch space that is a little more intimate and a little more quiet," Powley said.

For Huntington, the decision to close in-store branches in 2021 has coincided with the broader industry trend of reducing branch clusters. All 17 of the in-store branch closures since the TCF deal announcement have come where the bank has another branch within two miles. Almost all of the branch closures — 25 of the 29 — have been in Ohio where Huntington is based but TCF has little presence.

Peter Winter, an analyst for Wedbush Securities, said most of the branch closures from the deal are likely to come in Michigan, where the two banks have the most overlap. Huntington management reported that 224 of TCF's branches are within a three-mile overlap of a Huntington branch, and the company has announced planned closures of 198 branches. The bank estimates it will realize $490 million in cost synergies through the deal.

"My view is there is upside to that target as people adopt digital banking," Winter said in an interview. "You're just seeing, for the industry, an acceleration in branch closings."

Winter said the bank's recent focus on in-store branch closures is likely a result of the pandemic, which has driven an increase in deliveries and pick-up orders, reducing store foot traffic.

Banks themselves might also have less need for in-store branches from an operational perspective, Powley said.

"Being that in-stores are very transactional, it has been a good place to capture deposits," he said. "But right now with the current interest rate environment and financial institutions being flush with deposits, that's not as needed."