Bank of America Will Cut Branches, Add Services
By David Mildenberg
July 28, 2009
Bank of America Corp., the largest U.S. bank, expects to reduce its network of more than 6,100 branches, with the size of the cut still being discussed, the bank’s senior spokesman said today.
“We don’t have a final plan for the ultimate number of branches,” said James Mahoney, head of corporate communications at the Charlotte, North Carolina-based company. “Our vision is the network will be managed downward over time.”
Chief Executive Officer Kenneth Lewis told investors last week he plans to shrink branches by 10 percent, the Wall Street Journal reported today. Lewis’s comment came in response to a questioner who cited the 10 percent target, prompting Lewis to say “it could be around that range,” Mahoney said.
“It’s prudent to trim the branches by 5 or 10 percent every cycle,” said Ken Thomas, a Miami-based banking consultant who analyzes branch locations. “Ken Lewis understands you really have to buckle down on cost cuts.”
Bank of America gained 24 cents to $13.33 at 12:10 p.m. in New York Stock Exchange composite trading. The shares have dropped 5.4 percent this year.
Bank of America’s move to close branches may trigger similar action by other large U.S. banks because of the lender’s history as a trend-setter, said Nicole Sturgill, research director for delivery channels at TowerGroup, a consulting firm owned by MasterCard Inc.
“While other banks are not doing this now, they could because Bank of America always tends to be at the forefront,” she said. “Customers are turning to other methods of contact and banks have to be prepared.”
The bank is positioning itself to blunt the Consumer Finance Protection Agency proposed by the Obama administration, Richard Bove, an analyst at Rochdale Securities Inc., said in a report today. The agency, which must be approved by Congress, may tell banks to keep unprofitable branches open, Bove said.
The lender expects to add more services in branches to take advantage of its purchases of Countrywide Financial Corp. and Merrill Lynch & Co., Mahoney said. “Customers want a broader set of services through banking centers.”
Bank of America had 6,109 branches as of June 30, 22 fewer than a year earlier, according to a July 17 regulatory filing. It also operated 18,426 ATMs, down 105 from the previous year. The company ranks first in the industry with 29.2 million online banking accounts as of June 30, reflecting customers who have used online services within the past 90 days.
The number of accounts has been flat over the past three quarters and declined by 1 percent from March 31, the bank said.
The bank reported total deposits of $970.7 billion on June 30, compared with JPMorgan Chase & Co.’s $866.5 billion and Wells Fargo’s Co.’s $813.7 billion. Its U.S. market share is 12.2 percent, according to SNL Financial.
Bank of America “may have too many deposits” with interest margins pressed and too many unprofitable branches, Bove said. The bank “does not want to make loans,” he said, while “deposits keep pouring in.”
-- Editors: Rick Green, William Ahearn
To contact the reporter on this story: David Mildenberg in Charlotte at email@example.com
Last Updated: July 28, 2009 12:53 EDT
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