Why megabanks are seeing the value in new branches

Bloomberg

Bank of America , JPMorgan Chase and Wells Fargo are all eyeing targeted additions to their sprawling branch networks — an acknowledgement that brick-and-mortar locations remain critical for adding new customer accounts even after the megabanks spent years focusing on digital adoption and reducing the number of branches they operate.

The latest branch-expansion announcement came Monday, when BofA said it is planning to open 165 locations by the end of 2026 in an effort to grab retail deposit share in U.S. markets where it currently lacks a sizable presence.

The Charlotte, North Carolina-based bank said it is on track to add 40 branches to its network in 2024, including its first one in Louisville, Kentucky, this week. Bank of America has reduced its total location count by nearly 40% since 2010, while doubling its deposits in the same stretch of time.

But now Bank of America and its main competitors atop the U.S. retail banking market are focusing more on reworking their branch footprints, aiming to take advantage of cross-selling and wealth management opportunities.

Aron Levine, president of preferred banking at Bank of America, said in an interview that the $3.3 trillion-asset bank has "become very efficient" by balancing physical and digital services.

"It's been a critical element of our consumer strategy to have both a real commitment to industry-leading technology and digital capabilities as well as financial centers that are driving advice and guidance for our clients," Levine said.

Across the U.S., the total number of bank branches has been on the decline since 2009, though the pace of closures has started cooling.

Even as the adoption of digital banking has accelerated, in part due to the pandemic, in-person options are still important to consumers, including younger generations, said Adam Stockton, head of retail deposits at the consulting firm Curinos.

People generally don't use branches for day-to-day transactions anymore, but they want the option to go to a physical location and speak to a person when they have more complex financial needs, Stockton said.

Major banks like Bank of America, JPMorgan Chase and Wells Fargo have used these customer cues to redesign or consolidate existing branches, and are looking to new markets for expansion opportunities.

Achim Griesel, president of the consultancy Haberfeld, said that his firm's research shows that 90% of account openings from new households still happen in branches. Those accounts tend to be stickier and hold higher balances, he said.

"I don't think that number would be as high for a Chase or Bank of America," Griesel said. "But I still think it's a significantly high number — that if they want to keep growing, they can't ignore that channel."

JPMorgan — which has more U.S. branches than any other bank, at around 4,900, per S&P — is on track to open about 150 branches annually, the CEO of the company's consumer and community banking unit said last year.

As of Monday, the nation's largest bank by assets had filed applications to open about 170 locations in 2024, and to close another 90, per applications with the Office of the Comptroller of the Currency.

In JPMorgan's legacy markets, its market share is 20% to 25%, JPMorgan President and Chief Operating Officer Daniel Pinto said at an industry conference earlier this month. But the money-center bank sees a big retail opportunity in geographies where it hasn't operated as long, he said.

JPMorgan also wants to expand in wealth management, taking advantage of its 2023 acquisition of the failed First Republic Bank, Pinto added.

"Essentially the strategy is to use the branch network to capture the trillions of dollars of money that is being managed by someone else — of clients that have their primary account with us," Pinto said.

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In 2022, Wells Fargo fell to the number-two spot on the list of banks with the most U.S. branches.

But Chief Financial Officer Michael Santomassimo said at a conference this month that the San Francisco-based bank has been hiring and investing in high-deposit markets, and should "start to see some more growth come out of that as we go."

Even as Wells is decreasing its net number of locations, it's looking at "targeted expansions" in markets like Chicago, where it has said it will add at least 23 branches.

Wells is also aiming to use its locations as a boon for its wealth management business, Santomassimo said.

"The last piece is really going after the opportunity for the affluent client base in our retail branch system, which I'd say is almost an untapped kind of market for us," he said. "We have a couple of thousand advisers that sit across the branch system. We've added to that quite a bit over the last couple of years."

Bank of America said Monday that in the last year, its clients have made nearly 10 million in-person appointments with financial specialists.

Under a 10-year branch upgrade plan, Bank of America has grown its presence in Colorado and Ohio, two markets that the bank hadn't previously tapped. Following its launch in Louisville on Monday, the bank plans to enter the retail market in Boise, Idaho, with its first location expected to open in early 2025.

Bank of America's branches are primarily built to offer financial advice on topics such as mortgages, college savings and retirement planning, Levine said.

"We're saying, 'What is the right network? How many centers do we need?'" Levine said. "And then renovating the ones that we keep, closing the ones that have less client demand and opening up new ones where the growth of that market might be sitting. That's how we keep optimizing the channel so that we're serving more and more clients."

Polo Rocha and John Reosti contributed to this story.