The Bankwatch

Tracking the consumer evolution of financial services

BofA could eventually cut 10 pct of branches | SF Chronicle

This is a theme that is gathering steam. It is based on the reality that customers are using internet for their banking, and there is a high level of redundancy in offerring similar capabilities in physical locations. The counterbalance is of course the need to attract customers, new accounts and deposits which has traditionally been a branch activity.

That balance is shifting now and the tension between those two opposing forces will be ineresting to watch, as banks exectute strategies and consider their cost base.

BofA could eventually cut 10 pct of branches SF Chronicle

Bank of America Corp. could eventually shrink its 6,100-branch network by about 10 percent as consumers utilize other methods of banking, a company spokesman said Tuesday.

The move would be a pullback from the bank’s two-decade expansion, most recently under Lewis’ command, which expanded the bank from coast to coast.

[update] A quick look at Online Banking Report reminded me of an attribution I should have made, of Jims far sighted report in 2006.  In that report he rightly took a 40 year view.  Which Chairman at a bank is taking a 40 year view today ?

Online Banking Report: The Demise of the Branch (April 2006), for more on the long-term trends in the mix of branch and alternative delivery.

Written by Colin Henderson

July 28, 2009 at 16:35

3 Responses

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  1. Odd as it might seem for me to question the relative importance of internet banking vs. branch, I don’t know if there’s enough evidence to draw that conclusion. Or rather, I think there’s an explanation that might be simpler: if BofA is trying to cut costs, cutting branches is a very fast, very visible way to do it. Those suckers are expensive. 🙂

    Dan Dickinson

    July 29, 2009 at 07:41

  2. Sorry, hit submit too quickly.

    I know the spokesperson said this is happening because customers are moving to alternative channels, and it’s easy for people like us to jump on such news because it validates our existences, but it just seems odd to me that BofA happened to get religion at the precise moment when they probably have the greatest need to cut substantial costs. If they blame the internet maybe they won’t get accused of poor management by the branch staff…and the media.

    Dan Dickinson

    July 29, 2009 at 07:58

  3. @Dan … re both points they are both valid imho. But there is one recurrent theme – too expensive. Yes BofA has specfic problems but Lloyds is another that is reducing branches significantly. Both those banks have incurred significant costs through mergers … but they are also banks with significant branch coverage.

    So you are quite right to question what is frankly an assumption by me based on a personal prediction over that last 10 years that the time would come for branches to be significantly cut. Perhaps it has, and perhaps it hasn’t. Either way I cannot see any way to take out consequential lumps of banks’ cost without attacking branches.

    Removing a few HQ staff every few years is lip service to the real systemic problem that is duplication of service across multiple channels.

    Colin Henderson

    July 29, 2009 at 15:02

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