Dive Brief:

• U.S. banks are beginning to slow the rate at which they are shrinking their branch networks, S&P Global Market Intelligence found in a report it published last week. The slowdown comes after 2021 saw a record number of closures.
• Net branch closures fell to 312 in the second quarter of 2022 from 950 in the previous three-month span, the study found. “If closure activity continued during the remainder of the year at the same pace as in the first six months of 2022, net closures would drop 19% from 2021 levels,” according to the report. “That rate of decline may be conservative due to the nature of activity in the first quarter and the lack of immediate catalysts for broad-based shutdowns.”
• The recent downward trend in the number of closures could signal that banks are starting to strike the balance between offering customers a mixture of physical locations and digital channels to conduct transactions.

Dive Insight:

A December research note by the Federal Reserve, which sourced S&P Global data, found the number of bank branches has been on the decline since 2011, with the pandemic ushering in record levels of brick-and-mortar closures. 

“The total number of branches closed in 2020 exceeds both the number of branches closed during the most recent recession and the number of branches closed in any year between 2011-2019,” according to the Fed’s analysis.

Even though branch foot traffic has decreased, banks still view physical branches as an integral part of their distribution, S&P Global reported.

“Banks continue to right-size their branch networks and invest and drive customer activity into more cost-effective digital channels but seem to recognize the need to maintain some physical distribution, albeit on a smaller scale, to compete,” said Nathan Stovall, principal research analyst at S&P Global Market Intelligence, and one of the authors of last week’s report. 

JPMorgan Chase’s branch network expanded in the second quarter from the previous three months, but declined 1.5% from year-ago levels, according to the report. 

The bank has been closing branches in concentrated locations, while opening branches in new markets across the U.S.

PNC, meanwhile, has adopted a branch-lite model as part of its consolidation strategy by creating smaller, technology-focused “solution centers” in expansion markets. 

Affluent customers

Younger, affluent customers visited branches slightly more often than the average banking customer, S&P Global found. 

“While the majority of banking customers do not visit branches regularly, more affluent customers visited slightly more often, even among younger age groups, which have shown greater willingness to rely on digital and mobile channels for banking services,” according to the report.

More than half of younger affluent customers visited a branch in the past 30 days prior to taking the survey, compared with 45% among older affluent customers, according to the report.

The researchers defined “younger affluent” as customers born after 1967 who held $25,000 across their checking and savings accounts and had an annual household income above $100,000.

“There is evidence that affluent customers still use branches fairly often, and the nation's biggest banks, which have invested billions in digital tools, continue to selectively add branches and modernize existing locations,” Stovall said.