Tag Archives: Truist

FDIC Publishes Detailed Branch Data: Key Takeaways

The FDIC recently published detailed branch and deposit data for different geographic levels for all U.S. banks. EMI’s analysis of this data revealed the following trends:

  • There is a continued (but slowing) decline in the number of bank branches. Over the past 10 years, the total number of domestic branches for FDIC-insured institutions declined by almost 24% to fewer than 78,000 branches. This equates to an annual average decline of 2.1%. In 2Q21 and 2Q22, the y/y rate of decline exceeded 3%, but this slowed to 1.7% y/y to the end of June 2023.
  • Some of the largest banks had the strongest percentage declines in branches. Our detailed analysis of 30 leading banks (see below) found a 3.1% y/y decline in branches (from 35,039 to 33,920) at the end of 2Q23. However four banks with networks of more than 2,000 branches reported declines of more than 4%: Wells Fargo (-4.4%); PNC (-6.7%); Truist (-5.4%) and U.S. Bank (-8.1%). Santander Bank reported the largest percentage decline (-8.9%).
  • Some banks are growing their branch networks. While the overall trend has been for banks to trim their networks, some banks are maintaining or even growing their commitment to this channel. TD Bank grew its network by 11 branches, adding branches in 8 existing markets, as well as opening its first branch in The Villages, FL. Following the collapse of its planned merger with First Horizon earlier this year, TD announced plans to open 150 U.S. branches by 2027 with a focus on Southeast markets.
  • Banks are maintaining their presence in the vast majority of their markets. While banks are reducing branch density in their existing markets, few are completely leaving these markets. Seven of the 30 banks exited a market over the past year, but only one left more than one market: City National Bank closed its branches in both Reno and Carson City, NV.
  • Branch closures were spread across many existing markets. Overall, the 30 banks closed branches in 22% of their existing markets, through several had higher percentages of existing markets impacted by closures, including Santander Bank (56%), Truist (39%) and PNC (32%).
  • Banks concentrated their reductions on markets with the largest branch networks. Banks reduced branch densities in many of their main markets, enabling them to cut costs while maintaining a significant presence. Although more than a third of Wells Fargo’s branch reductions took place in just 8 markets, each of those markets continues to have more than 100 branches.
  • Some banks are opening new branches in existing markets. The 30 banks increased branch numbers in 4% of existing markets, led by TD Bank (increased branch numbers in 14% of their existing markets) and Fifth Third (13%), who are both expanding their presence in key southeastern U.S. markets. JPMorgan Chase increased branch numbers in 22 markets (10% of its existing markets), including Washington (+11 branches), Minneapolis (+9), Kansas City (+7) and St. Louis (+7).
  • J.P. Morgan Chase is leading the way in market expansion. Over the past year, the bank opened branches in 10 new markets, including Buffalo and Virginia Beach (4 new branches in each market). This is part of a longer-term strategy to grow its branch footprint: the bank reported at its 2023 Investor Day that its population coverage rose from c. 60% in 2017 to c. 80% in 2022, with the bank now aiming for 85% population coverage.

Traditional Banks Prepare for the New Digital Reality by Expanding Digital Functionality

Banking customers’ growing preference for digital (online and mobile) channels – as well as the huge number of digital challengers looking to gain a share of the market (read our December 2020 blog on segmentation among new entrants) – has led established retail banks to ramp up their investment in digital channels.

Growing digital banking users continues to be a prerequisite in establishing strong customer engagement. The onset of the COVID-19 pandemic in early 2020 was the catalyst for many reluctant consumers to use digital (online and mobile) banking channels for the first time. Many of these have continued to use digital channels even through branch banking has returned.

The top three retail banks – Chase, Bank of America and Wells Fargo – all report steady growth in active digital users. Bank of America claimed that 70% of its Consumer Banking households now use its digital channels.

Many U.S. banks also publish metrics illustrating that customers are using digital channels to carry out an range of banking activities, such as:

  • Conducting banking transactions:
    • The digital channel accounted for 68% of Region Bank’s total customer transactions
    • Interactions using Bank of America’s Erica virtual financial assistant rose 153% y/y to 94.2 million
    • 18% of UMB Bank’s consumer deposits were made using its mobile app
  • Making person-to-person (P2P) transfers:
    • Regions reported a 75% y/y rise in Zelle transactions
  • Acquiring new products and services:
    • Truist reported that 44% of new checking accounts were opened digitally
    • The digital channel accounted for 65% of U.S. Bank’s total loan sales
    • Citizens Bank’s digital sales volume rose 61% y/y
    • Huntington Bank reported that the digital channel accounted for 12% of new business deposit account production (a significant change from 0% in 3Q20)
  • Scheduling appointments:
    • Bank of America booked 871,000 digital appointments, up 31% y/y, and reported that these appointments accounted for 31% of its total financial center traffic

Obviously, banks will want to continue to enhance their digital functionality to meet consumer needs and differentiate themselves from competitors. Here are a few tips for doing so effectively:

  • Identify the bank departments, product lines or customer segments where digital channels have significant scope for growth
  • Carry out regular assessments of customer behaviors, needs and perceptions to inform digital investments
  • Conduct ongoing competitive intelligence to understand what digital functionality is now common among many banks, distill best practices, and identify competitive gaps
  • Prepare ways to counter internal barriers (e.g., organizational inertia, legacy processes) to speedy development and rollout of new digital solutions
  • Ensure that new functionality enhances the customers’ digital experience
  • Develop closer integration between digital and human service and sales channels
  • Develop plans to leverage marketing and customer communications channels to promote new digital functionality

Bank M&A Activity Increasing in 2021: Marketing’s Key Role in Merger Success

(The blog was originally posted in April 2021, and updated in July 2021.)

In recent months, there has been a series of significant U.S. bank M&A deals:

There has also been a regular stream of smaller bank acquisitions. Deals announced in recent weeks include:

  • Valley National Bancorp ($41.2 billion in assets) and Westchester Bank Holding Corp. ($1.3 billion)
  • SouthState Corp. ($40.4 billion) and Atlantic Capital Bancshares ($3.8 billion)
  • FNB Corp ($38.4 billion) and Howard Bancorp ($2.6 billion)
  • United Community Banks ($18.6 billion) and Aquesta Financial Holdings ($752 million)
  • Columbia Banking System ($17.3 billion) and Bank of Commerce ($1.8 billion)

In addition, banks are not just acquiring other banks in their entirety, but are also acquiring financial assets to plug gaps in their geographic reach or product portfolios. Recent examples:

  • In May 2021, Citizens Financial announced the acquisition of HSBC’s East Coast branch network as well as its national online deposit business.
  • In June, Regions Bank announced the acquisition of EnerBank USA, a home improvement lender.

We expect M&A activity to remain elevated throughout 2021, driven by the following factors:

  • The disruption in normal M&A activity in 2020 due to the COVID-19 pandemic likely means that potential deals put on ice over the past 12 months may come back to the fore.
  • Multiple industry surveys show a strong appetite for bank deals.
  • The current very-low interest rates will hinder organic growth opportunities.
  • Regional banks want to build scale to compete with the super-regional and national banks.
  • Acquisitions can help banks fill gaps in their product portfolio.
  • Banks are also interested in divesting units that they do not consider to be part of their core operations, and these units may be attractive to other banks looking to expand in these areas.
  • The potential for more deals between banks and fintechs is great, as banks look to build their digital capabilities, and fintechs look to grow their banking operations.
  • There has been a long-term trend of bank consolidation. Although the number of U.S. banks has declined by 35% over the past decade, there is a broad consensus that there are still too many banks in the U.S.

In announcing their deals, bank have been highlighting a number of potential benefits and opportunities. The following are some key areas where marketing departments will play a crucial role to turn this potential into reality:

  • Auditing of Marketing Assets…Including Personnel. Banks should conduct detailed audits to identify each bank’s relative strengths in various marketing categories (e.g., a legacy bank might be strong in content generation and social media, but weak in advertising campaigns and branch merchandise). It is also important to assess each marketing department’s levels of expertise and experience.
  • Brand and Logo. The first question for marketing to address: what is the brand post-merger? Most mergers simply use the acquiring bank’s brand, but there are situations where the acquired bank has stronger brand equity. And there also also examples of merging banks creating a new brand (e.g., BB&T and SunTrust merging to form Truist).
  • Positioning and Value Proposition. The merged bank’s marketing team will need to develop new positioning, value proposition and messaging that not only encapsulate the combined bank’s new identity and priorities, but that also aim to recognize the heritage of each bank.
  • Customer Migration. One of greatest threats to a successful bank merger is the disruption and potential attrition in migrating clients to the new bank (with clients dealing with potential unfamiliar platforms, processes and personnel). To optimize retention, marketing needs to conduct a comprehensive audit of all customer touchpoints and develop a detailed plan to update all customer-facing systems, processes and correspondence.
  • Branch Rationalization (and Investment). Bank mergers typically have specific cost-cutting objectives, and branch closures are one way to help achieve this objective, by eliminating overlapping branches and reducing branch density. However, the branch network will continues to perform key roles for bank in service, sales and marketing. The merger provides a perfect opportunity for banks to reposition, redesign and re-equip branches to perform these roles into the future.

In summary, marketing plays a critical role in ensuring the ultimate success of any bank merger. Furthermore, the head of marketing/CMO should have significant input into the merger process, both pre- and post-merger.