Bank branches fewer, but major decline isn’t forecast

10/16/2013 6:59 PM

10/16/2013 6:59 PM

After peaking at 99,550 branches across the country in 2009, the banking industry has pulled back on the number of bricks-and-mortar offices it operates, an SNL Financial report released this month said.

The report said the number of bank branches in the U.S. now totals 96,341, a 3.2 percent decline in the five-year period.

During that same time, the number of branch offices in the Wichita area has declined 1.2 percent, from 251 branches in 2009 to 248 in 2013, according to separate data from the Federal Deposit Insurance Corp.

While the data establishes a quantifiable decline in bank branches, it does not indicate the beginning of the end of bank branches, a subject of speculation in banking circles since ATMs started showing up at banks in large numbers in the 1970s.

“I think that for almost all of my career, I’ve heard it’s the end of branches, and it hasn’t happened,” said David Kerstein, president of Peak Performance Consulting Group in Austin, Texas. “Is it possible the number will continue to shrink? Yes, it is. Is it going to go down significantly? I don’t think so.”

Part of what’s driving the decline in branches is cost pressures that affect some banks but not others. For example Bank of America has been focusing on controlling its costs for several years and one of the ways it’s accomplished that is by trimming its branch network, Kerstein said. On the other hand, he said, JPMorgan Chase has been adding more branches than it has closed in roughly the same period.

Another factor in branch decline is industry consolidation, especially where one bank acquires another and both may have branches in the same neighborhood. “Do you really need that other branch?” said Chuck Marshall, a banking consultant for Kennedy and Coe.

“I think the need for a geographic footprint in a market is still generally thought of as an imperative,” Marshall said. But certainly his banking clients are thinking that footprint may not need to be as dense as before. That’s because younger generations prefer online and mobile banking to transacting business at a branch office. “When I talk with clients, we talk about their customer experience,” he said. “Twenty years ago, customer experience was what happened when people walked in door. The customer never has to come to a bank these days and can still have a … five-star experience.”

But the bottom line, Kerstein said, is at some point most customers want the security of knowing that if they have an issue, they have a physical place to go and a human with whom they can talk face to face.

“People still choose banks and stay with a financial institution because of convenience,” Kerstein said. “And convenience means you’ve got to be there. I don’t see bank branches as disappearing.”

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