US retail banks slashed their branch networks and trimmed headcount in the first half of the year in a bet that much of the foot traffic that went digital during pandemic lockdowns will never return.
Wells Fargo, Citigroup and JPMorgan closed more than 250 branches in the first half of the year, accounting for 1-5 per cent of their networks, with more reductions expected even as some lenders expand in certain locations.
San Francisco-based Wells Fargo, which had the highest branch count in the US at the start of the year, took the lead by closing 154 branches, or 3 per cent of its domestic network, and reducing headcount by 6 per cent.
“Our customers are increasingly leveraging our digital capabilities,” chief financial officer Michael Santomassimo said. “These changes and others have enabled us to adjust branch staffing.”
Citigroup cut its global branch count by roughly 100, or 4 per cent, with the closures spread across the US, Mexico and Asia. JPMorgan closed about 40 branches, or 1 per cent of its network.
The cuts represent a shift from the years leading up to the pandemic, when large US banks started opening new branches in a bid to grow their deposits after nearly a decade of cutbacks following the last financial crisis.
JPMorgan reported an increase in its branch count in the last quarter of 2019 for the first time since 2015.
Although foot traffic at branches has fallen dramatically over the past decade, banks have said physical outposts remain important for acquiring and retaining customers.
JPMorgan, Citi and Bank of America rolled out plans to enter new US markets in 2018 and 2019 and reiterated those commitments on Wednesday.
“The difference is that with digital, we can now enter a new market with fewer branches than we did five or ten years ago, and serve just as many customers, if not more,” said JPMorgan.
Chase opened 200 new branches last year in markets such as Minneapolis, Albuquerque, and Boston even thought its total branch count has fallen.
Analysts have long predicted that online and mobile banking would eventually render many bank branches and jobs redundant, but the pandemic has accelerated digital adoption.
Even customers that might have been hesitant to use a banking app for a large transaction or mortgage application were forced on to digital platforms during the lockdown.
At Bank of America, digital channels accounted for 44 per cent of all account openings and loan originations in the most recent quarter. That was slightly down from 47 per cent in the same period of last year when most of the country was in lockdown, but well above 29 per cent in 2019.
Bank of America’s branch count fell only marginally in the first half, but it cut 2,500 staff in the second quarter in part because of what chief executive Brian Moynihan described as “consumer efficiency”.
Retail job cuts have historically been a sensitive issue in the banking sector which is often accused of putting profit over people by progressive politicians.
Bank executives including Wells Fargo CEO Charlie Scharf and Moynihan predicted headcount will probably fall further this year, but mostly through staff leaving or retiring, which is less likely to result in a backlash.
“We have some internal plans,” Moynihan told analysts in response to questions about job cuts. “But we don’t go out and say that.”