Consolidation within the banking sector continues to accelerate as major financial institutions across the United States are rapidly shuttering physical bank branches, raising concerns among consumers and highlighting the shifting landscape of banking in the digital age.
October Bank Closures
Based on a recent bulletin released by the Office of the Comptroller of the Currency (OCC), Bank of America has taken the lead in this trend, closing down a staggering 21 branches within the first week of October. Wells Fargo closely followed with 15 closures, while US Bank and JPMorgan Chase reported the closure of nine and three branches, respectively. In total, 54 locations had either already closed or were scheduled to close between October 1st and October 7th. Notably, eight of Bank of America’s closures were in California, and three were in Louisville, Kentucky.
Financial Performance Amidst Closures
This wave of closures coincides with the release of third-quarter earnings reports from major U.S. banks, including Wells Fargo and JPMorgan Chase. Both banks reported increased revenue, driven by higher interest rates. But is what’s good for the bank good for the consumer?
An exclusive poll conducted by DailyMail.com revealed that 51 percent of consumers expressed some level of concern about the declining number of bank branches, while only 18 percent were not concerned at all. It’s a clear indication that the closure of physical branches is a topic of significant public interest.
A Broader Trend
The closure of bank branches is not a new phenomenon. In fact, U.S. banks closed over 3,000 branches last year, while opening just 1,000. JPMorgan Chase led in branch closures in the previous year, shutting down 144 branches while opening 133. This trend is expected to persist as traditional banks face stiff competition for deposits and younger customers from online banks, fintech firms, and Big Tech.
It’s important to note that the number of bank closures varies widely by area. Between 2017 and 2021, more than 7,000 branches closed in the U.S., accounting for 9% of all locations. Strikingly, one-third of these closures occurred in areas with large minority populations.
The initial wave of branch closures, sparked by mergers and acquisitions following the 2008 financial crisis, has given way to a new set of reasons for the decline of physical branches. Changing consumer preferences and advancements in banking technology are cited as primary drivers behind this shift. The investment by major banks in technology appears to be paying off as new apps and websites, offering an expanding array of services, have attracted a growing customer base.
The Changing Banking Landscape
The decline of state banks relative to federal banks is another factor in the consolidation of the industry. In states like Florida, where we are based, the trend has reversed, with more federal banks now than state banks.
As the banking industry continues to adapt to the digital era, the fate of physical bank branches remains uncertain. The rapid pace of closures, as witnessed in the first week of October, is not a hopeful sign.
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