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Bank of America Corp. plans to shrink its branch network by about 10%, BofA's CEO Kenneth Lewis told investors at a meeting last week at the company's Charlotte, N.C. headquarters, a move that will likely intensify competitive pressures among top credit card issuers, analysts say. There is no indication of when the branch-closures would occur. A BofA spokesperson declined to offer specifics, telling CardLine: "Bank of America continually evaluates its banking center franchise and decisions regarding its ultimate size have not been made." Analysts say BofA may reduce overhead by closing some branches and relying more heavily on lower-cost, fast-growing online- and mobile-banking channels. But if BofA shut 10% of its branches today, could find itself in a "horse race" with JPMorgan Chase & Co. in the hotly contested arena for in-branch credit card marketing, Scott Strumello, an associate with the Westbury, N.Y.-based Auriemma Consulting Group, tells CardLine. "BofA had roughly twice as many branches as Chase a year ago, but if BofA cuts 10% of its branches, it will have roughly the same number of branches as Chase (following its acquisition last year of Washington Mutual Inc.)," Strumello says. While online credit card marketing is a growing channel, branches "are still probably the most effective sales vehicle for new products, including credit cards," he says, noting that in-branch contacts accounted for as much as 39% of BofA's new credit card applications in 2007, according to his research. "I'm sure BofA has some room to cut branches to become more effective, and the company has been at the forefront of online credit card marketing. But branch networks have become very important for signing up credit card customers, especially as direct mail has declined, and if BofA cuts 10% of its branches, its retail sales machine will be roughly the same size as one of its chief rivals, Chase." Strumello calculates that after shrinking by 10%, BofA might after approximately 5,500 branches in 32 states, while Chase would have about 5,400 branches in 23 states. Wells Fargo & Co., which acquired Wachovia Corp. last year, overshadows all rivals with 6,600 branches in 39 states.
