Tag Archives: branch

JPMorgan Chase commits to the branch network

About a year ago, Bank of America announced that it would close up to 10% of its branches in the next few years.  Some industry commentators interpreted this as signalling the demise of the bank branch.  In a previous blog, EMI argued that this was not the case, but that the role of the branch is changing, with other channels handling a majority of day-to-day transactions, and with branches increasingly used for complex transactions that require face-to-face interaction.

Banks’ continued commitment to the branch channel was highlighted in JPMorgan Chase’s Investor Day presentations this week.  Some branch-related takeaways from these presentations:

  • JPMorgan Chase opened 154 new branches in 2010, expects to open 225 new branches in 2011, and plans to add up to 2,000 new branches in the next five years (more that half of which are planned for its key growth markets of California and Florida)
  • Branches accounted for 35% of new credit card account production in 2010, up from 11% in 2006.  Branches are now Chase’s largest credit card acquisition channel

In addition, JPMorgan Chase has adapted to the changing role of the branch by hiring more sales specialists.  According to its latest quarterly financials,  Chase personal bankers rose 21% y/y to more than 21,700 in 4Q10.  Sales specialists grew 22% to almost 7,200.

As banks recommit to fostering long-term relationships with their customers, they see branches are playing an integral role.  From a sales and marketing perspective, key challenges include:

  • Ensuring that the customer experience is consistent across all service channels (branch, call center, online, mobile, etc.)
  • Changing branch layouts
  • Training and providing support tools to new and established branch personnel to adapt to the new role of the branch
  • Communicating the wide range of services available in branches to customers and prospects

New FDIC data shows reduction in banks, branch numbers

FDIC has published comprehensive U.S. bank data for the period ended June 30, 2010. It reported that the number of bank branches fell 1.0% year-over-year, to 98,514. The total number of banks (comprised of commercial banks and savings institutions) fell by a larger percentage, 4.4%, to 7,820.

It is worth noting that, at the height of the financial crisis, some industry commentators believed that the number of banks in the U.S. would fall by 50%.  At the current rate of attrition, this is very unlikely.  However, bank consolidation should continue, with banks that have weathered the financial crisis well picking up failed or vulnerable banks in order to expand their retail footprint.  This may involve some branch reduction, as overlapping branches are eliminated.  However, branch numbers should continue to decline at a lower rate than banks.

From a marketing and sales support perspective, bank mergers and acquisitions create both opportunities (expanded retail footprint; access to new products, services and technologies; potential entry into new customer segments) and challenges (rebranding acquired banks and branches; implementing consistent marketing and sales support processes; minimizing churn from acquired bank customers, etc.).

Reports of branch channels’ demise greatly exaggerated

A few months ago, Bank of America reported that it would consolidate reducing the size of its branch network, with speculation that it would eventually close up to 10% of branches (Bank of America has grown its branch network aggressively over the past decade (organically and through acquisition) and even with a 10% decline, the bank would have approx. 5,500 branches).

Some industry commentators saw this announcement as indicative of the long-term demise of the branch channel.   With self-service channels accounting for a majority of service transactions, branch density does not have to be as high, so some branch consolidation is inevitable.

However, the bigger change is the repositioning of branches as platforms for more complex transactions that require one-to-one transactions with specialists.  The staff mix in branches will change, with fewer tellers needed to handle everyday transactions, and greater deployment of sales specialists (Chase recently reported that it grew its sales specialists from 5,454 in 1Q09 to 6,319 in 1Q10).