Record Number of Bank Locations Close in 2017, Even More to Come in 2018

By Robert Carbery

The retail apocalypse has hit the banking sector as physically going into a bank becomes less and less necessary in this age of rapid technological change and retail disruption.  
Wells Fargo closed 194 net branch locations last year while JPMorgan Chase shuttered 137. The Huntington National Bank shut down 134 and First-Citizens Bank & Trust Co. closed 127. Bank of America and SunTrust Bank each closed 119 while KeyBank slashed 112 stores.
 
Banks occupy a significant amount of ground floor retail space across the country and this news is adding to the heaps of negative news we have been hearing from the retail realm over the last few years during the rise of Amazon and the fall of the American shopping mall.
 
U.S. banks have continued to consolidate over recent years and are leaving massive amounts of leased retail space in its wake. Banks across the country closed a net 2,069 locations in 2017, according to CoStar, which equates to an 18% increase over the number of closed banks in 2016, totaling an astonishing 10.5 million square feet of retail space, which does not even take into account the number of banks that are reducing the size of their locations drastically.  
 
This trend is likely to accelerate in 2018 as consumers keep staying away from physical bank branches, doing more banking online or on their phone.
 
Wells Fargo, which has been roiled in scandals over the last year, has closed almost 200 branches this year and plans to close another 250 in 2018 and as many as 500 in both 2019 and 2020.
 
“Based on our current assumptions regarding consumer channel behavior and our own technology advances as well as other factors, we can see our total branch network declining to approximately 5,000 by the end of 2020,” according to John Shrewsberry, CFO of Wells Fargo, which had 6,082 branch locations in the U.S. as of September 30, 2017.
 
The closures are not just hitting the biggest banks and largest occupiers of retail bank space. In actuality, banking is going through a significant transformation at the moment as consumers shift to digital banking. As many as 85% of banks plan to make digital transformation a top priority for its business, according to the EY Global Banking Outlook 2018. However, according to the same report, banks around the world are still optimistic about remaining profitable. The outlook survey of 221 institutions in 29 markets showed that bankers are positive about improving their financial performance this year and in the years to come. According to EY, 59% of those surveyed stated that they anticipate increasing their technology investment budgets by more than 10% this year.
 
Some are even making moves to acquire other companies to help in their technology ramp up. For example, BB&T Corp. said last week that they will invest as much as $50 million in emerging digital technology companies in order to assist with lowering total operating costs. With this occurring across the banking sector, financial technology (fintech) is becoming a rising industry all on its own as banks move more online to cater to its customers.
 
But what will happen to all of that vacant bank space on the ground floors of so many commercial buildings in major metros nationwide? And when will the trend of bank locations closing finally slow down? I can’t even remember the last time I went into a bank. I guess that tells much of the story right there.
 
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