U.S.banking companies continued to shutter branches and downsize their physicalfootprints during the 12 months ended June 30, lengthening the trend to sevenyears, the FDIC's annual Summary of Deposits shows.
The latest SOD — released Sept. 30 and including data from July 1, 2015, throughJune 30, 2016 — shows 91,861U.S. branches at June 30, down from 93,273 12 months earlier and down from99,550 at June 30, 2009, the last point at which the SOD showed branch countsrising.
Bankersand analysts say Americans continue to do more of their banking business onlineand via their mobile devices, minimizing the need for traditional branches andproviding banks with opportunities to trim expenses and reinvest savings intotheir digital platforms.
Thoseforces have and continue to drive a long-running trend that shows no signs ofabating, analysts say.
"Ithink more branch consolidation is a lasting theme," James Bradshaw, ananalyst at Bridge City Capital LLC, said in an interview. "They just don'thave the foot traffic anymore."
is among thebanks exemplifying the trend. The Cincinnati-based lender this month announcedintentions to consolidate or sell 44 branches. Closures are slated for early 2017.
Thisbuilds off of an earlier initiative to shutter or unload more than 100 branches— about 8% of its locations at the time it wasannounced in 2015 — that Fifth Third recently completed. The actions areexpected to save more than $60 million annually, Fifth Third Presidentand CEO Gregory Carmichael said at a conference this month.
Carmichaelsaid the moves do indeed reflect a shift in customer habits. "Changes intechnology and customer behavior will continue to transform our branchnetwork," he said.
Carmichaelstopped well short of forecasting the demise of branches altogether. Banks ofcourse still need some physical space in which to meet customers. Carmichaelnoted that Fifth Third sees dwindling need for branches to handle routinetransactions. But he does see a need for offices in which to advise customerson major loans or long-term financial planning. That noted, the bank needsfewer locations to manage this kind of work.
"Weare very mindful that branches are important. We are looking at the type ofbranches, the location of those branches and doing what's right for ourshareholders and our customers," Carmichael said. "But I would expectthis to be an annual exercise and, as it is this year, there's an opportunity Ithink to continue to lean back our infrastructure."
Bradshawalso noted that, at the community bank level in particular, ongoing mergers andacquisitions continue to result in fewer branches. When one bank acquiresanother, the buyer often looks to close or sell off overlapping branches,bringing down costs and bolstering the profitability of the deal. M&A"is very likely to continue," he said, as many small banks look togain heft to better absorb high regulatory costs and gain efficiencies.
Casein point: Hope BancorpInc., the bank created by the merger of BBCN Bancorp and WilshireBancorp. The Los Angeles-based company said this month that it would close orrepurpose 12 overlappingbranches this year. It added that it plans to consolidate morebranches in the first half of 2017.
HopeBancorp President and CEO Kevin Kim said in a release that the consolidationsdemonstrate "the significant synergies created through our recent merger."
TheWells Fargo & Co.scandal mayultimately hasten the branch trend. Regulators this month fined Wells $185 million for allegedly allowing thousands ofemployees to open some 2 million sham accounts over several years.
Regulators have said the San Francisco-based bank pressedretail employees too hard to make sales at a time when fewer customers arewalking into branches. Diana Chase,managing partner of bank consulting firm ChaseCompGroup LLC, said the Wellsdebacle will surely lead other banks to review their branch sales practices,and many of them are likely to conclude that aggressive sales efforts inbranches are increasingly fruitless; banks may in turn direct even more oftheir strategic work to digital initiatives.
"Thereis just so much more going on technology-wise," Chase said in aninterview.
Meanwhile,as branch numbers decline, banks are still amassing deposits. The latest SODshows that, for the industry, deposits grew 5.74% from a year earlier. Amongthe top 15 bank holding companies, deposit levels grew 6.39%.
The increases in deposits demonstrate that banks aresuccessfully cultivating customer relationships via online offerings, analystssay. "Mostbanks are in good shape when it comes to funding," Bradshaw said.
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