New England bankers agree that big changes are needed at their branches, but the fixes they have in mind are divergent.
Executives at Webster Financial (WBS), Independent Bank (INDB) and People's United Financial (PBCT) laid out contrasting plans to adjust their retail networks Wednesday at the Keefe, Bruyette & Woods conference in Boston. Some are adding branches while are scaling them back, and some are turning to new technologies to deliver services or guide sales and compensation decisions.
Smaller banks have long wrestled with the question of whether, or how quickly, to cut back on branches, but higher overhead costs, declining foot traffic and the surge in mobile banking have intensified the pressure.
"My prediction is that in 30 years the branch will be unrecognizable compared to what we see today," Chris Oddleifson, chief executive of Independent in Rockland, Mass., told conference attendees on Wednesday. "In the next five to 10 years, we need to be really thoughtful because one of our key strategic strengths is having all that physical distribution."
Webster's Aggressive Cuts
The $21 billion-asset Webster, in Waterbury, Conn., has been praised by Wall Street for trimming its branch network, and for its quick adoption of new technological offerings. Chairman and CEO Jim Smith promised more cuts and more tech investment, along with calculated expansion into dense, wealthy markets.
After trimming its branch network by 4% last year, Webster plans a further 20% reduction in the next three to five years, Smith said. Webster will also look to reduce the square footage of the remaining branches. Along with closing physical branches, the company switched to a new branch-staffing model that reduced head count by 7% last year, he said.
"We're consolidating where we can, responding to the changing consumer preferences," Smith said. "We know how much more business is being done in an automated fashion, but we're also looking to open strategic locations as well."
Webster recently opened its first office in the New York City area, which Smith says is "off to a good start" and is adding to the company's loan pipeline. It will consider opening smaller offices - not necessarily branches &mdash in other business-dense, affluent areas, Smith said.
Independent's Cautious Take
Independent is taking a similar approach to selective openings. The $6 billion-asset company opened its first Boston office last year. While the company has selectively shuttered branches, including four it obtained from its 2013 purchase of Mayflower Bancorp, Oddleifson didn't commit to sweeping branch cuts during his presentation.
Webster and Independent overlap in their efforts to analyze data to improve internal processes, along with sales and marketing interactions with clients.
Webster is introducing a system that calculates the profit the bank earns on each product it sells. The system then adjusts the pay system to reward branch employees based on the value of products sold, Smith says. Independent has used the "gigabytes" of consumer data it gathers to improve its home-equity offerings and deposit gathering, Oddleifson said.
People's: Pro-Branch Moves
People's United in Bridgeport, Conn., has taken the opposite approach to branching. It has added 70 net branches since the end of 2010, according to the Federal Deposit Insurance Corp. Most of the additions came from acquisitions, though it also closed some redundant branches. The expansion has helped the $33 billion-asset company improve penetration in key markets like Long Island, N.Y., and Boston, President and CEO Jack Barnes said.
Five new branches in Westchester County, N.Y., showed People's United that it could be successful in markets next to its home state. From 2010 to 2012, a whole-bank acquisition and a deal for 56 branches, mostly located in supermarkets, raised its New York profile.
The supermarket branches, obtained from Citizens Financial, made sense since People's United is "good at in-store banking" and was able to turn around "what was a losing operation" by more than tripling the deposits of those branches in a year, Barnes said.
A mix of de novo and acquired branches also allowed People's United to expand around Boston and bolster commercial lending, Barnes said. People's United provided financing to a number of commercial customers that bought out rivals during the economic downturn.
"This was going on while we were entering the two largest MSAs in our geographic area where we were very underrepresented," Barnes said. "Getting into New York and Boston allowed us to... move the business forward."