One measure of a bank branch network's strength could be its density: Leading market share positions can imply advantages in local brand recognition, back-office costs and perhaps a measure of pricing power.
During a presentation late last year, Richard Johnson, PNC Financial Services Group Inc.'s chief financial officer, said, "If you're one in two in a small market, you can do extremely well." He added that "in a larger market, you probably want to be one, two or three, because that's where most of the money is made."
Under those criteria, PNC compares well against its peers. Based on branch deposit data at June 30, 2010 — the date of the latest deposit survey by federal regulators — it ranks first, second or third in more than half the markets in which it operates (see charts).
But among institutions with deposits of more than $50 billion, Wells Fargo & Co. has by far the largest proportion of top-three market rankings. (Institutions that operate in fewer than five markets in all have been excluded from the charts, and the branch data has not been adjusted to reflect announced or completed transactions since the date of the deposit survey.)
Wells Fargo, which seamed together a coast-to-coast footprint with its 2008 acquisition of Wachovia Corp., has a top-three share of deposits in almost 74% of the metropolitan statistical areas in which it operates. (MSAs are geographic units defined by the federal government that encompass socially and economically integrated regions with urban cores of at least 50,000 people.)
BB&T Corp. ranks in the top three in only about a third of the MSAs in which it operates, but holds a top-three share in more than 50% of all the markets in which it operates, including counties that are not attached to MSAs. The company is emblematic of the importance of rural footprints to some institutions, where there can often be few competitors. (In 21 of the 137 markets where BB&T holds a top-three share, it has only one or two competitors. Similarly, Wells Fargo has only one or two competitors in 69 of the 455 markets where it holds a top-three share.)
Measured by the proportion of their markets where they hold a top-three share of deposits, companies like Citigroup Inc., Royal Bank of Scotland Group PLC and U.S. Bancorp seem to be spread relatively thin.
However, under another measure of density — the proportion of an institution's deposits in markets where it holds a top-three share — most large banking companies appear relatively centered. Though the figure is heavily influenced by large pools of deposits recorded at headquarters branches, the median for the large group considered here is almost 60%.
Among a sector of large regional banking companies — those with total deposits of $10 billion to $50 billion — Popular Inc. appears to have the densest branch network, though it, like neighboring First Bancorp, faces a small list of competitors in a number of markets in its home island of Puerto Rico and in the Virgin Islands.
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