What the financial industry is now calling “The Great Consolidation” has accelerated during the pandemic, doubling the rate of closures of all types of bank branches to 200 per month.
The fastest closing rate is recorded for in-store branches, with banks closing 17.4% of in-store outlets, compared to 3.1% for all other branches, according to an S&P Global analysis of recently released data for the year ended in June. 30, 2022.
In-store banking outlets reside in retail stores, including grocery stores. Banks have been removing their footprint from in-store outlets since 2015; the share of branches represented by an in-store location fell to 3.9% from a level of 5.5% in 2015.
The annual decline in the number of in-store bank outlets appears to have stabilized at less than 5% until 2020, when it fell to 6.3%, before collapsing with the closure of 17, 4% of inventory in fiscal year 2021.
S&P said metros that have been impacted by accelerated branch closures over the past five years (measured as the percentage of inventory of branches that have been closed) include Portland, OR (19.7%); Baltimore (14%); Hartford (14%); New York (13.5%); and Sacramento (13.3%).
According to a report by the National Community Reinvestment Coalition (NCRC), 9% of all bank branches in the United States closed between 2017 and 2021, a loss of approximately 7,500 physical locations.
The pace of branch closings doubled during the pandemic, the report said, from 99 per month to 201 closings per month. Banks have closed more than 4,000 branches since March 2020.
The pandemic has also accelerated consumers’ growing preference to do all their banking online and avoid bank branches altogether. A recent annual PwC survey found that 32% of respondents indicated that they no longer do their banking in a branch.
According to the NCRC report, the closure of bank branches had a disproportionate impact on low-income communities, undermining the Community Reinvestment Act. The CRA, a federal mandate enacted in 1977, requires banks to serve the communities in which they do business.
The report says branch closures are creating “banking deserts” in some rural areas. He also warned that the closures were having a negative impact on small businesses.
“Small businesses still rely on in-person banking despite the proliferation of online alternatives, and shrinking branch networks threaten local economic activity that is critical to creating wealth in marginalized communities,” the report said. NCRC.
The shrinking footprint of banks is apparently not limited to the decreasing number of branches. Some of the nation’s largest financial institutions have been busy shrinking the footprint of their offices in the nation’s largest city.
Crain’s recently reported that JPMorgan Chase, New York’s largest office tenant, has reduced its footprint by 700,000 square feet over the past two years. Overall, the nation’s largest bank still leases 8.7 million square feet in New York.
Crain’s also reported that Wells Fargo reduced its retail space in New York City by 600,000 square feet last year.
