In the first two months of the year, US banks closed about 222 branches.
Leading the charge were Bank of America, US Bank and Citizens, which together accounted for nearly half of all closures – 92 in eight weeks. If banks continue at their current pace, around 1,300 banks will close this year.
The closures, which were reported to the federal regulator, the Office of the Comptroller of the Coin (OCC), in January and February, reflect a broader trend.
Banks are becoming increasingly confident in the capabilities of online banking, said Steven Reider, the founder and president of Bancography, an Alabama-based consulting firm that advises banks on branch planning and strategies.
That trust can lead to significant savings, as the average freestanding bank branch costs about $2.6 million per year. In just two months, Bank of America’s 41 closures could have saved the bank nearly $100 million.
In the first two months of the year, US banks closed about 222 branches. Leading the charge was Bank of America, US Bank and Citizens
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“Banks are willing to close a branch that does not overlap with any other branch, on the gamble that customers are willing to drive a little further,” Reider said.
“I think Bank of America has leaned on that more than the other big banks,” he added.
Last year it closed 157 branches but opened only 34.
Reider also noted that Bank of America’s merger history has led to it acquiring branches in rural areas as the industry undergoes “an urban-to-rural transformation.”
“Every census since 1910 has shown that a greater share of Americans live in urban areas than the previous census, so as we become an increasingly urbanized nation, demand in these traditional rural markets is only fading,” he said.
Ultimately, banks want to consolidate the markets they’re already in, and that means placing more emphasis on dominance in a handful of cities.
For example, Chase is forcibly moving into Kansas City, Fifth Third is making similar moves into Charlotte, and PNC is targeting Austin.
Just this week, Huntington said this would be the case expanding into Texas via Dallas.
“These are the fast-growing metro areas that also tend to have a favorable number of households per location,” says Reider.
“The decision on location will be based primarily on where they can attract deposits and where they can attract those low-cost, non-interest-bearing consumers.”
Bank of America’s history of mergers has also increased its presence in rural areas, but the industry is trending toward consolidation around cities
Although bank branch closures began to increase in the 2010s, they were exacerbated by the pandemic, which kept people at home.
Although they have continued, they appear to be leveling off. “As an industry, we are still shedding industries, but the pace has slowed significantly,” Reider says.
A Bank of America spokesperson told DailyMail.com last year that the bank would indeed close certain branches in response to declining customer traffic, but that the number of closures would likely level off in the future.
And now credit unions are playing a more important role than ever before, offering very similar services to traditional banks and eating up a share of the market.
Unlike banks, their footprint is expanding and now accounts for approximately 18,000 branches in the US.
“Credit unions have been in a growth phase over the last decade and banks have obviously been in a phase-out phase,” Reider said.
“They are aggressively expanding and moving into markets where community or national banks have been vacated,” he said.
“I think in terms of overall consumer share, they will continue to be an important and meaningful competitive force.”
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