Bank shut 1,600 sites since financial crisis as it shifted from
'bigger is better' tack
By Rachel Louise Ensign and Coulter Jones
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 18, 2017).
Bank of America Corp. pulled all of its branches out of Indiana
four years ago when it sold off a group of antiquated storefronts
in Rust Belt towns. Later this year, the lender is returning but
this time is targeting affluent customers in the state's largest
city, Indianapolis.
The Charlotte, N.C., bank, the nation's second largest lender,
has gotten rid of around 1,600 branches since the financial crisis
as it seeks to rekindle sagging profits and focus on major
metropolitan areas. The reductions are roughly equivalent to
shutting all the Citigroup Inc. and Capital One Financial Corp.
outlets in the U.S.
The strategy would represent a stark change for any big lender,
but it is a particularly striking departure for a bank built over
decades on the idea of offering a coast-to-coast network in areas
urban and rural.
"Bigger is indeed better," former Chief Executive Hugh McColl
said when the bank was formed in 1998 by the merger of NationsBank
Corp. and BankAmerica Corp.
But strains from the financial crisis led to a different
approach. In 2009, the bank had branches in 725 U.S. counties,
roughly one out of every four nationwide. In 2016, it was in 253
fewer counties, according to a Wall Street Journal analysis of bank
regulator data.
Bank of America no longer has a branch in places like Elkhart,
Ind., Dodge City, Kan., and Florence, S.C. In the Utica, N.Y.,
area, where there were 12 branches in 2009, there are now none.
"You can't be everywhere," said Dean Athanasia, co-head of the
bank's consumer unit, in an interview. Nevertheless, he said the
bank's footprint, with 4,542 branches, covers 80% of the U.S.
population. "I don't think we were optimally positioned
before."
In most counties the bank left, it sold at least some of its
branches to smaller lenders, limiting the harm to that community.
In nearly a quarter of the counties, Bank of America simply closed
the branches, directing customers to other locations, sometimes
dozens of miles away.
Meanwhile, Bank of America is opening new branches in a number
of big metropolitan areas where it previously didn't have them, a
rare move for a big bank in recent years.
With its emphasis on more urban markets, the bank in part is
adapting to demographic changes. Many rural areas have struggled
with population decline and lower male labor-force participation as
highly educated young workers flock to urban centers. But the bank
also is grappling with the fallout of the financial crisis. New
restrictions on overdraft fees also hit consumer-banking revenue,
and a determination to avoid the mistakes of the subprime era led
to a new focus on creditworthy customers.
Branches have also lost much of their reason to exist because
routine transactions such as depositing checks and transferring
money are increasingly done on computers or phones. Banks can't get
rid of branches altogether, however, because many customers still
pick their bank based on whether it has a nearby branch. Important
product sales still happen there.
Older Bank of America branches were typically dominated by a
long row of teller windows. In the newer branches, the tellers are
sometimes in the basement. The new branches emphasize big-ticket
purchases, with customers taking out a mortgage or addressing an
account issue waiting on midcentury modern couches and checking in
with a staffer holding an iPad.
When a banker emerges, he or she is expected to greet the
customer by name, usher them into an office and slide the glass
door shut. Many new branches feature a room devoted to Merrill
Edge, an investing service for people with up to $250,000 in
assets. Branches in new and existing cities are getting the
layouts.
The approach stems in part from two big acquisitions. After
dozens of traditional bank deals, in 2007 Bank of America bought
U.S. Trust, a private bank that targets clients with millions to
invest. The next year, it agreed to buy Merrill Lynch & Co. in
the heat of the financial crisis.
Bank of America was hit hard by the financial crisis, receiving
some $45 billion in aid from the U.S. Treasury. As a part of a plan
to further stabilize the bank, Chief Executive Brian Moynihan
announced plans in 2011 to cut $5 billion in annual costs in the
consumer unit and related areas.
Pulling out of the rural branches was one way to reach the goal.
The typical urban branch easily clears its roughly $900,000 annual
operating cost with revenue of about $2.5 million, compared with
$1.4 million for the typical small city or rural outpost, said Jon
Voorhees, a Bank of America retail executive from 2004 to 2015 and
now an industry consultant.
Once money became tight, "why would I want to invest to rebuild"
in the less populated areas "when I could build a branch in
Manhattan?" he asked.
The bank said revenue is just one of a number of factors it
looks into when evaluating a branch, including deposit balances and
client satisfaction.
Bank of America inherited some of its rural branches through
deals that also included big-city locations. In the cities where
the bank is opening its first branches such as Indianapolis, Denver
and Minneapolis, it already has Merrill and U.S. Trust customers.
In the Indianapolis area, there are about 128,000 wealth-management
and commercial clients.
Overall though, the bank has cut 1,597 U.S. branches since the
beginning of 2009, which includes closures in counties where the
bank maintains a presence. Of the counties Bank of America has left
from mid-2009 through the middle of 2016, more than 95% were
outside metro areas with 1 million or more people, the Journal
analysis shows. The bank's increasingly urban network looks more
like those of New York-based J.P. Morgan Chase & Co. or
Citigroup.
Through the changes, Bank of America has continued to add
consumer deposits -- $55 billion last year. While revenue has been
falling in recent years, profits have hit their highest point since
2006. And earnings at the bank's consumer unit, which includes its
branches, increased 8% last year.
Write to Rachel Louise Ensign at rachel.ensign@wsj.com and
Coulter Jones at Coulter.Jones@wsj.com
(END) Dow Jones Newswires
September 18, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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