U.S. banks accelerated their pace of branch consolidation last year, closing a net 2,069 locations, an 18% increase over the net number closed in 2016.
The net number of closed branches amounts to about 10.46 million square feet of retail space closed based on the average size of existing U.S. bank branches. And that amount does not include reduced square footage from branch relocations.
That pace of closures could speed up even more in 2018 as a number of bank holding companies reported plans to deploy a significant portion of expected savings from tax reform legislation enacted last month into increased spending on technology, expected to support increasing reliance on digital and mobile technology by bank customers to conduct more of their banking activity.
Wells Fargo & Co. (NYSE:WFC) is the poster child of the movement. It closed a net of 194 branches last year – the highest among all U.S. banks — and it expects to close 250 branches or more in 2018, plus as many as 500 in each 2019 and 2020.
“Based on our current assumptions regarding consumer channel behavior and our own technology advances as well as other factors, we can see our total branch network declining to approximately 5,000 by the end of 2020,” said John Shrewsberry, CFO of Wells Fargo.
As of Sept. 30, 2017, Wells Fargo operated 6,082 U.S. branches. The bank is also reducing properties and other businesses including standalone mortgage locations and is transitioning operational activities in its auto business from 57 regional banking centers into three larger regional sites.
Citizens Financial Group (NYSE:CFG) represents another approach banks are taking in shedding excess space: reducing the overall square footage of each branch.
“There’s a little bit of pruning of the number of locations, but the greater element of that program is trying to take 4,200-square-foot branches and turn them into 2,500- or 2,200-square-foot branches,” said Bruce Van Saun, chairman and CEO of Citizens Financial. “I’d say, by 2021, I think we’ll have gone through 50% of the branches as the target. Citizens operates more than 1,100 branches. The rent savings from the effort will be reinvested in digital technologies.”
Meanwhile, 85% of banks plan to make digital transformation programs a business priority for 2018, according to the EY Global Banking Outlook 2018.
“In order for banks to weather the performance challenges that lie ahead, they must prepare for a future led by innovation and technology,” said Jan Bellens, EY Global Banking & Capital Markets Deputy Sector Leader. “The pace of innovation continues to accelerate, and banks must have a strategy in place to ensure their implementation of new technology is effective.”
According to EY, 59% of banks surveyed anticipate that their technology investment budgets will rise by more than 10% in 2018.
BB&T Corp. (NYSE: BBT) announced last week it will set aside up to $50 million to invest in or acquire emerging digital technology companies to help lower its operating costs.
“A significant investment in fintech [financial technology] puts BB&T on an aggressive pace to more quickly navigate our digital road map and further foster a culture of innovation throughout the company,” said W. Bennett Bradley, chief digital officer of BB&T. “Things are changing rapidly and we, like many financial institutions, have to move faster to meet and exceed our clients’ expectations.”
BB&T operates over 2,100 financial centers in 15 states and Washington, DC.
Banks closing the most branch locations (net) in 2017:
- Wells Fargo Bank, 194 (net closures)
- JPMorgan Chase Bank, 137
- The Huntington National Bank, 134
- First-Citizens Bank & Trust Co., 127
- Bank of America, 119
- SunTrust Bank, 119
- KeyBank, 112
- PNC Bank, 109
- Branch Banking and Trust Co. (BB&T), 92
- Capital One, 73