Bank of America (BAC) reduced its automated teller network almost 9 percent this year by yanking most of the devices deployed at U.S. gas stations and malls.
The bank's total number of ATMs fell by 1,536 in the first half, a record decline, leaving it with 16,220 as of June 30, the Charlotte, North Carolina-based firm said last week. Bank of America didn't renew deals to place its machines at sites owned by Simon Property Group Inc., the biggest U.S. shopping mall owner, and gas station operator Valero Energy Corp., said Anne Pace, a spokeswoman for the bank.
"When they put an ATM in a mall or gas station, they have to rent that space in the same way that Sunglass Hut has to pay for their space," said Bart Narter, a senior banking analyst at consulting firm Celent. "They did the math and probably concluded that these guys aren't profitable."
Chief Executive Officer Brian T. Moynihan is shrinking the bank's footprint to focus on his most profitable clients after regulations squeezed fees and he aborted plans to charge debit- card users $5 a month. Moynihan shuttered 108 branches this year and plans at least 30,000 job cuts in a reversal of the expansion led by his predecessor, Kenneth D. Lewis.
"It's going to be a smaller platform," Moynihan said in a November conference. "We have 42 million retail customers; many of those don't contribute or overcome their cost-to-serve."
Limited Capability
Bank of America chose to pull most of its ATMs at malls and gas stations in part because those devices only dispensed cash and weren't available 24 hours a day, Pace said in an interview. Customers want to be able to deposit checks at an ATM, she said.
"It's about convenience and access, that's what the customers are looking for," Pace said. "People aren't banking 9 to 5, they are banking when it's convenient for them."
The move stems from Moynihan's Project New BAC, an efficiency plan that targets $8 billion in annual expenses by 2015. The number of ATMs shouldn't change much more, she said. Bank of America fell 1.9 percent to $6.94 at 9:35 a.m. in New York, heading for its fourth-straight decline. The lender has dropped 13 percent since posting second-quarter results last week.
It costs banks an average of $1,700 per month to run an ATM on someone else's property, compared with $1,100 at a branch, said Tony Hayes, a partner at consulting firm Oliver Wyman in Boston. The difference stems from rental costs and fees for armored couriers to refill machines with cash, he said.
Valero's Locations
"There are very real expenses to owning and operating ATMs, and since banks don't charge their own customers to use the machine, the costs are borne entirely by surcharges paid by non-customers," Hayes said. "In the current environment, banks are unable to support the cost structure they have historically."
Valero, one of the biggest U.S. refiners, also manages about 1,000 U.S. retail locations mostly in Texas, as well as in Louisiana, Arkansas, New Mexico, Colorado, Arizona, California and Wyoming, said Bill Day, a spokesman for the San Antonio- based firm. Another 5,000 independently run sites that include other states weren't covered by the bank's deal, he said.
"Each side has an option to renew and Bank of America chose not to renew," Day said in a telephone interview. "The ones that belonged to Bank of America have been removed and in most stores they've been replaced by other ATMs."
Simon Property had 325 retail locations across 41 states and Puerto Rico as of April, said Les Morris, a spokesman for the Indianapolis-based company. The number of mall ATMs hasn't changed, though the provider has, he said, without specifying who replaced Bank of America.
