U.S. Bancorp could step up branch closings post-COVID

U.S. Bancorp could acclerate the pace of its branch closings as customers have become more comfortable using its digital channels during the coronavirus pandemic, executives said Thursday.

For over a year now, the Minneapolis company has anticipated it will close 10% to 15% of its branches in legacy markets while opening branches in select new markets. Speaking at the Bernstein Strategic Decisions Virtual Conference, Chairman and CEO Andy Cecere said the $543 billion-asset U.S. Bancorp could reduce its branch count even further as it looks to reduce expenses. He said that between 17% and 35% of digital transactions are those that typically took place inside branches before the pandemic struck.

“I would expect we would accelerate and probably do more [branch closures] given the behavior changes that have occurred and ... digital investments that we've made,” he said Thursday.

U.S. Bancorp was closing branches in legacy markets at a rate of about 1% to 2% per year until it was released from a consent order concerning its anti-money-laundering compliance late in 2018. After the consent order was lifted, the bank was free to begin expanding into select markets in Texas and the Southeast, which it still plans to do.

Executives also said Thursday that the second quarter is shaping up better than expected, as many borrowers who had requested forbearance have continued to make loan payments. Roughly 30% of mortgage customers who had sought forbearance are still making monthly payments.

Many commercial clients have also begun to repay lines of credit they drew down in the early days of the pandemic, said Chief Financial Officer Terry Dolan. Customers drew down roughly $22 billion worth of credit lines in the last 15 days of the first quarter, but many ended up depositing the funds into their accounts. Dolan characterized those line draws as largely “defensive in nature.”

Dolan said that payments and card income have begun to rebound, too. At the end of the first quarter, debit card income was down by 20%-30% from a year earlier, but second-quarter income is roughly the same year over year. Income from credit card and commercial payments is down from the same time last year, but it's much improved from two months ago, he said.

“We expect it to continue to strengthen again as people start to normalize with respect to the stay-at-home orders and the states opening up,” Dolan said. “We see the second quarter being better than what we had expected.”