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U.S. Banks Closing Branches

Article Submitted by: Sean Riskowitz
Banks


For the first time since 2002, bank branch networks in the United States are getting smaller.

 

Submitted: Mar 10, 2010    Views: 463    Comments: 0    Likes: 2   


The days of having a banking branch on every corner of every street are over.
 
According to SNL Financial, a research firm that tracks data filed with bank regulators, the total number of retail branches in the U.S. is on pace to decline this year for the first time since at least 2002.
 
Several banks are taking the knife to their operations and national presence in order to close down branches that are viewed as unattractive. Banks such as JP Morgan Chase (JPM) and PNC Financial Services (PNC) are cutting down on overlapping branches and reducing their branch count for the first time in 8 years. Apparently banks that are expanding are doing so at a much lower pace than initially planned.
 
According to SNL, the number of bank branches in the United States has declined by about 300, or 0.3%, since June 2009. There are currently 98,913 bank branches across the nation. The FDIC says there are 6,839 commercial banks in the country, meaning each bank has, on average 14.46 branches.
 
The current number of branches is still 15% higher than in 2002, but the persistent increase in banking branches driven largely by profits generated from investment banking and derivative securities has come to a close.
 
Despite the retreat in banking locations, people are depositing more money into U.S. banks, mainly because of higher deposit insurance limits introduced by the FDIC. Retail investors still remain in cash after the credit and liquidity crisis of 2008.
 
The Federal Deposit Insurance Corp. says that in 2009, the 8,012 banks and savings institutions in the U.S. had just $12.5 billion in combined profits, down from $100 billion in 2007. A total of 140 banks failed (which is only 1.74% of the total), while 179 disappeared through mergers and acquisitions, and 702 (a troubling 8.76%) are considered by the FDIC to present significant risk. One of the reasons banks are expanding their branch networks less is the lack of lending activity these banks are engaging in, leaving the firms with less money for capital expenditures such as new branches.
 
According to the an article by Robin Sidel, J.P. Morgan is scooping up former Blockbuster video-rental stores as the bank increases its retail presence in Florida. In Jersey City, NJ, a former Washington Mutual branch inherited by J.P. Morgan was transformed recently into a 7-Eleven convenience store. About 30 miles away in Morris Plains, N.J., a former WaMu location converted into a Chase branch is directly across the street from another Chase branch. Such cannibalization will inevitably lead to smaller branch networks. Chase has 377 branches in New York City with 1,862 ATMS. With a total area of 303 square miles in New York City, that’s one Chase branch every 0.8 square miles.

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