First Union Corp. is dropping hints that it plans a massive cutback of its branch network, to be offset in part by more use of telephone call centers.
"Customers are redefining what convenience and service looks like to them - and increasingly that definition does not include brick-and-mortar branches," says First Union's 1995 annual report.
The report sketches plans to develop alternative delivery channels such as call centers, ATMs, and home computers.
Analysts said officials of Charlotte, N.C.-based First Union had told them that a 50% reduction in the 1,964-branch network is possible within seven years.
But First Union spokesman R. Jeep Bryant said the nation's sixth-largest bank holding company is not ready to reveal details of its ongoing Consumer Bank Reengineering Project, which is designed to shift customers from branches to the other delivery channels.
Testing will continue this year, with implementation expected in 1997, he said.
"It's still in the laboratory mode," Mr. Bryant said. "Until you see how successful the other channels are going to be, you don't know how much customer volume will remain in the branch network."
But the annual report and an internal newsletter lay out some general themes for the reengineering project.
Pointing to the success of Britain's First Direct Bank, which operates entirely by telephone, First Union says its "focus for the next few years will be primarily on increasing our existing businesses and on attracting customers nationally through better electronic product delivery channels."
Company documents suggest that the crux of the plan is to supplement branch networks in individual markets with local telephone call centers, called "customer relationship centers," which in turn would be linked to First Union Direct, the company's current call center in Charlotte.
The local call centers would handle service and sales functions, so customers could conduct all transactions except deposits and cash withdrawals over the phone.
First Union also plans to upgrade and expand its ATM network to better handle those routine activities.
That plan, combined with the reengineering project, implies that First Union may be preparing to dramatically reduce the number of traditional branches - although it stops short of stating that in its publications.
First Union does say it plans to convert the surviving branches into true sales centers, where employees equipped with new hardware and software could spend "90% of their time cross-selling the current customer base." The hope is that most of the service functions now handled in the branches could be shifted to the telephone bank.
To design the project, First Union formed a consumer reengineering team last year that included 14 consultants and 80 full-time employees drawn from all areas of the bank. After First Union management signed off on the initial plan in September, the team began organizing pilot projects for this spring in two North Carolina markets: Durham/Chapel Hill and Asheville.
First Union has already begun downsizing its branch network in smaller markets. Just last week, Suffolk, Va.-based James River Bankshares announced it had purchased two First Union branches, with $34 million of total deposits, in Franklin and Courtland, Va.
Last month First Union began soliciting bids for four Georgia branches, two in Albany and two in Atlanta, with $200 million of combined deposits.
