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San Diego
Thursday, May 23, 2024
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Transforming the Transactions

Despite a quantum shift by more consumers doing their banking via the Internet and ATMs, most banks say they have no plans to eliminate their retail branch networks.

And yet, many banks are reducing the size of their networks as they seek to slash costs and respond to the continued trend of customers making fewer branch visits.

In the past year, Bank of America, based in Charlotte, N.C., and the nation’s second largest bank, reduced its retail branches by about 300, while cutting some 1,000 ATMs.

In San Diego, BofA closed only one branch in the Rancho Bernardo area last year to bring the total in the county to 73, said Steve Mahinfar, Bank of America’s area executive overseeing San Diego and the Inland Empire.

“We’re constantly looking at how our customers can do their banking easier,” Mahinfar said. “Brick and mortar (an actual branch building) is a big part of it, but obviously technology is growing fast … so we’re adapting accordingly.”

Consumers’ ongoing adaption of new technologies such as mobile check deposit and balance transfer via smartphones has caused a noticeable decline in branch traffic, but banks assert few customers want to see the branches vanish.

Making Banking Easier

“Our bread and butter is still our traditional stores,” said Ernesto Arredondo, Wells Fargo Bank San Diego area president who manages 41 branches in the county. “The majority of Wells Fargo customers visit a store at least once every six months … They want to be able to sit down with our team members to discuss more complex questions.”

San Francisco-based Wells Fargo, the fourth largest bank in the nation, maintains a network of about 6,200 branches, including 104 in the San Diego area. The local number has stayed flat over much of the past four years.

Echoing a common refrain of bigger banks, Arredondo said the bank’s strategy is to make banking easier for its customers, and is always looking at innovative ways of delivering services.

To that end, Wells recently introduced a new branch model that is smaller, and needs fewer employees. The branches are about 1,000 square feet compared with the traditional average of 3,000 square feet. The offices have both ATMs and workers with wireless tablets who interact with customers needing assistance.

“The new branch models are designed to enhance the Wells Fargo experience, not to replace our regular stores,” Arredondo said. “From all that I’ve heard, the new model has been very well received, and they could possibly be bringing it to San Diego in the near future.”

Not to be outdone, BofA rolled out a new ATM model last month called Teller Assist that allows customers seeking help to get ahold of a live banker via an interactive video screen. The first machines were installed in 12 locations in Atlanta and Boston.

Branch Banking Is Critical

Lawrence Henry, Union Bank’s regional executive for the San Diego division, said his bank closed only one branch in the county in the past year, to bring the total to 57.

In all, San Francisco-based Union Bank, with about $97 billion in assets, operates 443 branches mostly in California, but also in Oregon and Washington. That’s up from 402 branches about a year earlier, the bank said.

Although there’s been a clear shift in consumer behavior to conduct bank business electronically, “the branch banking network is a critical part of our overall retail banking strategy,” Lawrence said.

Customers using ATMs and mobile banking still want to have the ability to come into a branch office to handle more complex transactions such as obtaining a loan or bank wire transfers, he said.

In a time of compressed profit margins and tepid loan activity, all banks are closely scrutinizing their balance sheets, especially their labor-intensive retail networks. Offices that aren’t measuring up to certain expectations are usually closed, said several bankers.

Steven Sefton, chief executive at La Jolla-based Regents Bank, said his bank pulled the plug on an underperforming El Cajon branch last year after the office failed to reach the bank’s expectations. The office had only $12 million in deposits while the average for most of the bank’s existing five branches is about $100 million, Sefton said.

Bringing the Bank to You

Regents, with about $600 million in total assets, is a perfect example of a bank whose target customers are businesses that use remote deposit capture technology and online channels to do the bulk of their banking transactions.

“Businesses don’t need to come into a branch,” Sefton said. “We take the bank to the business. That’s our motto. We take the bank to you.”

After Regents parent company, Los Angeles-based Grandpoint Capital, acquired California Community Bank earlier this year, it closed two of that bank’s branches in Encinitas and the Miramar area. In addition to El Cajon, Regents closed another branch in Carlsbad because the deposits and loans were too small to offset the costs of maintaining those offices, Sefton said.

While Regents deemed the branches unproductive, some other banks, especially those seeking a foothold in this market, may view them entirely differently, he said.

“One bank’s closure is another bank’s opening,” Sefton said.

Even though credit unions maintain a nonprofit, cooperative status, those organizations are also looking harder at all their operations to ensure profitability, including their branch networks.

San Diego County Credit Union, the area’s largest with about $6 billion in total assets, is not considering shrinking its retail network, said CEO Teresa Halleck.

‘Redefining the Branch Experience’

Although SDCCU has invested heavily in technologies that make banking easier and faster, it’s imperative that customers always have the option of coming into a branch for a face-to-face interaction, Halleck said.

SDCCU added a single branch last year to bring its total to 29. This year, the credit union plans to open two more branches.

“We’ll continue to expand our branch network as long as it makes sense for us and the members who we serve,” she said.

Another megabank clearly in a branch expansion mode is JP Morgan Chase, which is the nation’s largest lender with more than $2.4 trillion in assets. Chase had no branches in California up until its acquisition of failed Washington Mutual Bank in 2008. Through that federally assisted deal, Chase took over 76 branches locally and added 23 more to bring the total in the county to 99, making it the area’s second largest network.

And like a few other banks, Chase is tweaking its branch model, adding ATMs that can provide exact change and offer other services such as bill-pay. It’s also altering the branch look to give them a more open atmosphere, attempting to make them more conducive to attracting and retaining clients.

“We are redefining the branch experience so our customers can come and have a more holistic conversation about their financial life,” said Chase spokeswoman Suzanne Ryan.

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