Have electronic delivery channels become so popular and promising that bank branch acquisitions will become a thing of the past?
The answer is a resounding no, say bankers and consultants.
Industry experts say banks that have set their sights on acquisitions can't expand their consumer base into new markets without buying the brick and mortar that come with it.
"I think anybody would find that next to impossible," said Philip G. Heasley, vice chairman at First Bank System Inc., Minneapolis.
James McCormick, president of First Manhattan Consulting Group, said the "odds are near zero" that a nationwide consumer bank will emerge within the next five years without having "an extensive network of person-to-person facilities, which would include traditional branches, minibranches, and in- store facilities."
While electronic delivery is proliferating, acquisitive banks continue to be attracted to branches because they are usually the home of transaction accounts, which typically forms the core of a consumer-banking relationship.
"We probably do not look at the acquisition of the retail portion of the bank as the acquisition of branches," said Mr. Heasley, whose bank acquired Omaha's Firstier Financial Inc. this year and attempted to buy First Interstate Bancorp. in 1995. "We look at it as the acquisition of customer relationships."
The value of branch sales announced in the first half of 1996 was significantly lower than in 1995; the decline mirrored that of bank mergers. Some $8.75 billion of deposits was transferred in the top 10 branch sales. That wasn't much more than the single biggest deal in 1995, GreenPoint Financial Corp.'s purchase of 60 branches with $8.2 billion of deposits.
But there were big deals. Harris Bancorp purchased 54 branches from Household International with $2.9 billion of deposits. H.F. Ahmanson won the bid for 61 First Interstate Bancorp branches in California.
Part of the attraction of branches is that they are the delivery channel of choice for banks' most profitable customers. A First Manhattan study last year found that the 40% of customers who don't use the phone or ATM represent 60% of branch profits.
Further, even banks planning to close branches and spur customers to use alternative delivery channels haven't let brick and mortar get in the way of acquisitions.
Last year, PNC Bank Corp., bought 84 Chemical Banking Corp. branches in southern New Jersey and later bought Midlantic Corp. Those moves followed plans announced in 1994 that PNC would close 30% of its branches over three years.
Wells Fargo & Co., San Francisco, said it would close 350 branches when it bought First Interstate. But the $108 billion-asset bank has also launched plans to operate 775 supermarket branches by the end of this year, up from just 37 in 1994.
"The big banks are the ones out there spending the most money for the branch networks," observed Vernon Hill, chief executive of Commerce Bancorp in Cherry Hill, N.J., which is opening branches at a rate of one a month. "They talk about the branches dying, but they are going out and buying hundreds of them."