Bank Branch Bulking

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I recently tweeted:

“Pointing to bank branch closures as a signal of the death of branches is like saying that someone who’s lost weight is dying.”

Turns out that was a terrible analogy. A closer inspection of what’s going on with bank branches is that banks aren’t really slimming down — they’re bulking up.

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SNL published data on branches by asset size for the top 20 banks, comparing 2012 to 2009 (see the chart below). Among the top 10 banks, total branch volume declined by 1%. The biggest losers (not a pejorative statement) were Bank of America and Regions Bank who shed 10% and 9% of their branches, respectively. BB&T and PNC were the big gainers, growing branch count 23% and 10%, respectively.

But the real story in bank branches isn’t the number of branches. It’s the change in the distribution of branch size.

Among the top 10 banks, the number of branches with less than $10m in deposits dropped by 15%. In contrast, the number of branches with more than $100m in deposits grew 7%, and the number of bank branches with $50-100m in deposits increased by 4%.  In addition to the decline in branches with less than $10m in deposits, the number of branches with $10-30m in deposits receded by 4%. 

In 2012, the top 10 banks had 663 more branches with $100m+ in deposits than they did in 2009. And they had 930 fewer branches with less than $10m.

This branch bulking was fairly consistent across the top 10 banks. Eight of the ten banks increased their percentage of branches with $100m+ in deposits, despite the variation across banks.

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For example, even though Bank of America’s branch count declined by 10% between 2009 and 2012, the decline in branches with more than $100m in deposits totaled just 8 branches. As a result, the percentage of their branches with more than $100m in deposits increased from 54% to 59%.

At US Bank, which had just 17% of branches with $100m+ in 2009, grew that percentage to 25% in 2012. Wells Fargo also increased its distribution of branches to the $100m+ category to 54% in 2012, up from 48% in 2009.

The decline in the less than $10m category is striking. SunTrust closed nearly 40% of its branches in this segment, Wells Fargo closed more than a third, and Bank of America and RBS closed one in four.

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While I’m not a big fan of banks investing big dollars in branches, the proclamations of the death of bank branches — that rely on total bank branch numbers — are misguided.

Branches aren’t dying. Small branches are dying. Banks are bulking up the remaining branches.

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