Author Archives: mronan

The demise of bank branches?

In August 2009, Bank of America signaled that it would be reducing its branch network by up to 10%.  Some industry commentators took this to be indicative of the longer-term demise of the branch channel.  These analysts pointed to branch costs, as well as the increased usage of online banking and related services.  Most leading U.S. banks did reduce branch numbers in 3Q09.  However, many of these banks acquired other banks over the past year, and the reduction in branch numbers comes from the elimination of overlapping branches.

Going forward, banks may well continue to shave branch numbers in order to control costs and reduce branch density.  However, we do not envisage the demise of the branch channel.  What we are seeing is a re-evaluation of the role of the branch, given that online banking, online bill payment and mobile banks are not accounting for a growing share of day-to-day banking transactions.  In the future, branch activities will be more focused on complex interactions, such as lending, marketing of new products and services, the provision of financial advice and general relationship development.

The following are branch counts for leading banks in 3Q09 (with changes from 2Q09 in parentheses)

  • Wells Fargo: 6,653 (down 15)
  • Bank of America: 6,008 (down 101)
  • Chase: 5,126 (down 77)
  • PNC: 2,553 (down 53)
  • Regions (down 4)
  • BB&T: 1,859 (up 354, due to acquisition of Colonial Bank)
  • SunTrust: 1,690 (down 2)
  • Fifth Third: 1,306 (no change)
  • Citi Retail Banking North America: 1,051 (up 21)
  • KeyBank: 1,003 (up 10)
  • Huntington: 610 (no change)
  • Comerica: 444 (up 3)

Falling marketing spend among financial institutions

Over the past year, most leading financial institutions have cut their marketing spend. As these firms face rising provisions for losses and declining revenues, they are look for other ways to cut costs, and marketing spend is squarely in their firing line.

bank_marketing_spend1

Banks are pursuing different approaches to cut marketing spend, including: altering the media mix to focus on less expensive media; and reducing/eliminating marketing of certain products (e.g., many banks have pulled back on credit card marketing over the past year).  In addition, banks should focus on getting the most from their marketing, by ensuring that it is synch with other aspects of their business, particularly sales.

The return of relationship banking

We have heard much in recent months on banks going “back to basics” and pursuing a relationship banking approach. One of the recent manifestations of this approach is the provision of financial needs assessment, which enables the banker to develop a closer relationship with the customer, as well as providing a platform for marketing financial products and services.

–In introducing new checking accounts, Fifth Third Bank is placing a good deal of emphasis on its free Financial Needs Assessment

–A recent U.S. Bancorp presentation highlighted that it is pursuing a relationship banking approach by offering relationship reviews as well as product packages. Almost half of new U.S. Bank DDA customers are selecting a Consumer Package.

usbank_enterprise_revenue_office1

Banks cannot just automatically switch from a product-centric to a relationship banking model.  In effecting this transition, marketing and sales support (in particular, training and providing support tools to branch personnel) play key roles.  In addition, product development needs to switch from a silo-based approach (often with different product units within a bank competing for the customer’s attention), to a solutions-based model, centered on customer needs and behaviors, and a longer-term payoff.