ST. LOUIS — Upheaval in the financial sector and the economy as a whole is creating new short- and long-term trends in facility development.
As they look to consolidate their existing community footholds big banks are leading the way in branch re-modeling, which Kevin Blair, CEO of NewGround, believes is the "next big wave" in the sector.
When financial institutions build state-of-the-art branches and other facilities, those locations become the "flagships," while the community, members and employees see the others as obsolete, he explained. That is a serious error, and one costly to the bottom line, as deepening walletshare at already established branches is a major source of new revenue.
"Sometimes we overlook where the greatest potential is which is the existing branch network," Blair continued. "By not upgrading the other branches it sends a signal to employees that these branches are not worth the investment and sends a signal to the members that these branches and markets are not important."
With a suffering brand image and bad bottom line numbers, big banks are making major efforts to upgrade their existing branches with the latest technology or simply give them facelifts to make them more appealing and comfortable to their customers. Major acquisitions such as JPMorgan Chase's firesale purchase of Washington Mutual and Wells Fargo's buying of Wachovia will help propel the trend in the short term as the purchasing banks look to quickly put their brands' stamps on the old facilities.
Branch Closures Also Offer Opportunity
The over-saturation of the marketplace has already led to a number of branch shutterings, which is expected to continue for some time. That is giving credit unions the opportunity to purchase the abandoned branches and remodel them to their liking. However, CUs would be wise to do plenty of research on locations with appealing price tags.
"There's a lot more of it happening today than there was before the market changed," explained Tom Lombardo, national director of business development for Clayco. "The thing you have to keep in mind that sometimes in these mergers the branches they are going to close are not the best performing branches. You have to be careful; just because a facility is for sale much below market doesn't mean it is a good investment."
"Of course they are going to sell off their worst performers," added Ben LaMacchia, VP-planning and real estate for Milwaukee-based LaMacchia Group. "You need to be very cautious in picking and choosing which branches you'd want to take over. At times people tend to perceive a greater value than what exists."
Ralph LaMacchia, founder and president of LaMacchia Group, argued credit unions that prefer re-modeling an existing structure to building from the ground up would be better served looking at buildings other than vacated financial facilities.
"What is probably going to happen is that you'll find a restaurant and that's perfect because no one wants to buy it-it's ugly and you'll be able to pick it up at value," he said. "But it all gets back to the basics. If it doesn't fit into your plan and it isn't going to bring anything back to you, I don't know if you want to do that."
For credit unions not looking to expand, or simply do not have the capital to make a big move right now, a small investment at their existing branches can go a long way, Blair contended.
"The investment does not have to be significant. We have clients who spent $30,000 to $50,000 just to make [their branches] look clean and inviting," he said. "The return on investment is much easier to measure when you're making those smaller investments like that."
