ABA Banking Journal - August 2010 - (Page 28)
feature | branch banking few new bank charters since the crisis began, which has contributed to the slow pace of de novo branching. Still, some banks continue to pledge their commitment to expanding their branch networks. In May, KeyCorp’s Chief Financial Officer, Jeffery Wheeden, announced plans to build 40 new offices and modernize 85 others in 2010. For banks with investment capital and growth plans, the current environment— with reduced real estate prices and distracted competitors—provides an opportunity for expansion. next expansion will be less dramatic Many healthy banks, however, are holding off on de novo openings in anticipation of weaker competitors failing, putting themselves on the market, or divesting individual locations. Between June 30, 2009, and the time that this article went to press, 267 offices had been sold via branch transactions and 2,989 via whole company transactions (both assisted and unassisted). For several reasons, we foresee more branches changing hands through traditional (i.e., unassisted) whole bank mergers and acquisitions than through deals for individual branches or FDIC-assisted acquisitions. First, it appears that slim pickings of choice individual locations are muting would-be buyer interest. Second, competition for FDICassisted deals is intense. Deal terms are now more favorable to the FDIC, making assisted transactions less attractive for buyers. Third, many banks—especially smaller banks—will be under tremendous profit pressures for many years causing some to seek buyers. In the not-too-distant-future, we expect to see low property costs drive some increase in de novo activity. Real estate services firm Grubb & Ellis does not predict most mar28 | ABA BANKING JOURNAL | august 2010 Trend in de novo branch activity Net new branches * 3,695 2,921 3,781 3,880 De novo branches 3,988 3,764 2,735 2,762 2,315 2,479 2,213 1,680 1,292 863 1,982 1,792 1,912 687 161 7/006/01 7/016/02 7/026/03 7/036/04 *de novos less closures 7/046/05 7/056/06 7/066/07 7/076/08 7/086/09 7/096/10 p Source: CPG analysis of SNI Financial data 2010 (822) C kets will begin to turn around until 2011. By that time, we anticipate that optimism of economic recovery, combined with still-low rents, should entice banks looking for new branch locations to get back into the game. In addition, as good retail space becomes available, banks will look for opportunities to relocate offices to growth areas from less attractive, more mature markets. We will not, however, return to the level of new branch expansion that we saw prior to the financial crisis as investment continues to shift towards improving online, mobile, ATM, and other forms of automated delivery. in-store has fewer adherents Interestingly, we see a mixed future for in-store branches. In-store de novo activity declined even more sharply than that of traditional branch offices over the last 12 months. A number of prominent banks have signaled that the channel does not make sense for them. Capital One’s Chevy Chase Bank closed all of its Giant Food in-stores in 2009, while Zions has done the same with all of its Utah Smith Food & Drug in-store offices. For these and many other banks, in-stores have stood primarily as transaction processing centers, and today, ATMs and online technology represent cheaper approaches. There are, however, banks that report success in cross-selling services and acquiring customers via in-stores. Pat Piper, executive vice-president of BOK Financial, “loves the fact that as online capabilities give customers fewer reasons to enter a bank branch these days, the great majority of these same customers still prefer to buy groceries in person.” inside the branch: design, technology & staffing We closed our 2009 ABA Banking Journal branch-banking article by predicting that the channel would evolve as banks update design standards to reflect better their individual brands and an understanding of local market characteristics. NewAlliance Bank’s new Hartford branch provides an example of that evolution. NewAlliance Bank recently finetuned its brand with a promise to help its customers to thrive. In addition, the New Haven, CT-based institution has a unique history and deep ties to its footprint communities. Mark Gibson, NewAlliance’s M Y CM MY CY CMY K
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