Bankers Defend Their Branches, Say Death Reports Are Greatly Exaggerated

BOCA RATON, Fla. — The demise of bank branches has been predicted for years, but bank executives are stubbornly refusing to prepare any obituaries.

Branch critics point out that storefronts are expensive for revenue-strapped banks to maintain, while customers are using them less and less. But bankers this week rallied in defense of their brick-and-mortar locations, even as they acknowledged that branches are losing some ground to mobile and online banking.

"I see mobile technology as very important, but not a replacement" for branches, Cathleen Nash, the chief executive of Citizens Republic Bancorp Inc., told American Banker in a phone interview on Wednesday.

She is fighting a losing battle with some industry members, who say standalone branches have about as much use as the now-defunct Blockbuster or Borders.

"We're coming to the point very soon where we won't be able to afford just to have branches, on the off-chance that a customer may need it," Brett King, founder of the soon-to-launch MovenBank, told American Banker in an interview on Sunday.

"Behavior is shifting, whether it's three years or five years," he said.

But it remains to be seen whether mobile banking becomes the equivalent of the game-changing Netflix, which helped push Blockbuster out of business, or whether it will be something more akin to Amazon.com. While the giant online retailer has undoubtedly altered its industry's landscape, rivals including Target and Best Buy have survived to compete with Amazon in stores and online

"Where do branches fit among increasingly new technology?" asks Nash. "It's not that they don't fit."

But she acknowledged that banks may have to slim down their branch counts, and be careful to invest in them only to create "activities that support revenue growth in a cost-effective way."

U.S. Bancorp CEO Richard Davis, who began his career as a teller in California, agrees that branch evolution will not necessarily equal displacement.

"I think we all agree that the literal form of a branch will change, because the number of teller windows will continue to reduce," Davis told American Banker in an interview this week.

He and other bank executives discussed the viability of bank branches at American Banker's Best Practices in Retail Financial Services conference, which took place in Florida this week.

Davis says he still believes wholeheartedly in the long-term value of branches as hubs for collecting deposits and dispensing advice.

"This would be the worst time" to close branches, Davis says. "Interest rates are virtually zero and people at this point are not competing so much for deposits. You need to wait to call the question on the value of branches in an environment where a recession is not present and — not or — where interest rates are not rock-bottom," he says, arguing that in better times, branches are key to competing for deposits.

"Right now they [branches] are looking their worst because there's not much to be done in terms of deposit gathering" or in terms of lending, Davis says.

In a speech at the conference on Tuesday, Davis also said that his focus is on in-store locations, rather than standalone branches.

"I would do a lot more nontraditional [storefronts] if I could, and we will continue to, because I do think the future of the branch is still a place for guidance and consultation," he said. "No matter what the brick-and-mortar is, it's going to have to be where people want to be or where they're going to be, not calling them off the streets anymore."