U.S. bank branch closures reached a new high in 2018 as consumers continued to migrate to online and mobile banking options.
Retail banking has been defined by widespread closures in recent years, with net branches shuttered totaling 1,947 branches in 2018, up from 1,919 in 2017. The wave of closures appears here to stay: In S&P Global Market Intelligence's most recent mobile banking survey, a better mobile app experience was the No. 4 reason customers gave for considering a bank switch, beating out a broader branch footprint.
"It's obviously not going to go to zero, but I would expect it to continue," said James Barth, a finance professor at Auburn University. "Banks are deciding you don't need as many branches. You need them in strategic locations where you can have the biggest bang for your buck."
Consolidation in the industry has also contributed to the branch closure trend. Hundreds of banks have sold off in recent years in due to rising compliance costs and a more competitive landscape, among other factors. In-market deals are often most popular since the acquiring bank can generate cost savings by shuttering branches, Barth said.
"When branching networks overlap, you shut the branches that you think are least profitable if you're a bank acquiring another bank," Barth said.
Wells Fargo & Co. reported the most net closures in 2018, at 293, or roughly 5% of its overall network. The bank also has the most branches, with 5,671 active locations remaining.
Capital One Financial Corp. shrank its footprint by 15% and BB&T Corp. shuttered 8% of its branches. BB&T plans to close an additional 150 branches in 2019 on top of reducing the amount of non-branch space the company operates by 3.9%. Management stated during a November 2018 investor day that the bank has retained the vast majority of its clients after closing a branch by focusing on client outreach and retention incentives. BB&T also detailed a focus on digital offerings to take the place of brick-and-mortar branches, such as virtual banking centers, expanded technology offerings at ATMs and a more robust online platform.
At the same time, BB&T stated that it plans to open branches in select markets in future years. Similarly, JPMorgan Chase & Co., which closed more than 100 net branches in 2018, is opening branches this year as it pursues an expansion plan in certain markets.
"For a while, you heard people talk about 'the branch is dead.' But the reality is that's not happening any time in the near future," said Mayra Rodriguez Valladares, managing principal of MRV Associates, a consulting firm for banks. "A lot of these guys are finding it makes sense to have branches."
Closures were not spread evenly across the nation's 50 states. Two states showed net gains in branches last year as banks added two net branches in Rhode Island and one net new branch in South Dakota. At the other end of the spectrum, Florida led all states in net closures with 200 lost branches. That was not merely a function of the number of branches in the state: Among the 10 states with the most net closures, Florida lost the greatest portion with its branch footprint shrinking by 3.9%. By contrast, California has nearly 2,000 more branches than Florida but experienced half as many net closures last year.
Barth said demographics are also contributing to the persistence of the branch despite growing mobile and online usage. Older customers tend to be the ones who value access to a branch, and those clients generate significantly more profits than the tech-savvy younger population, he said.
"That's the trend that not everyone is capturing," Barth said. "Older people generate most of the profits, and they go to branches more, so the banks need to keep them open."
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S&P Global Market Intelligence combines bank branch data with demographic information, which can be accessed via the market demographics page under the market analysis section of a company's Briefing Book page on the web platform or the Office Screener.