July 29 (Bloomberg) — Bank of America Corp., the largest U.S. bank, may cut branches over the next three years because customers increasingly rely on the Internet and mobile phones to manage their accounts, an executive said.
“We’re seeing a strong acceleration in our customers using our virtual channels,” Liam McGee, president of consumer and small-business banking, said yesterday in a telephone interview. “We are doing what you’d expect us to do, which is look at the business and be sure our combination of channels and services remain at the cutting edge.”
Bank of America, based in Charlotte, North Carolina, ranked first in the industry with 29.2 million Internet accounts as of June 30 and 3 million mobile customers, according to McGee. Half of customer deposits are made through automated teller machines, compared with a third six months ago, because ATM’s now let customers insert checks without using envelopes, he said.
The bank had 6,109 branches as of June 30, 22 fewer than a year earlier, according to a July 17 filing. Chief Executive Officer Kenneth Lewis has told investors he plans to shrink branches by 10 percent, the Wall Street Journal reported. Lewis’s comment came in response to a questioner and was hypothetical “as opposed to anything definitive,” McGee said.
“We could possibly have fewer branches, but we have no specific plan around how many banking centers we will have,” said McGee, 54. “We have no target identified.”
Bank of America gained 25 cents to $13.34 in New York Stock Exchange composite trading yesterday. It has dropped 5.3 percent this year.
‘Key Capability’
The bank is pleased with the “hundreds of banking centers” added in recent years, McGee said. “Our banking centers will always be the key capability of our company.” The bank operates 18,426 ATMs, down 105 from a year ago.
Branch closings would be driven by a desire to cut costs after the purchases of Countrywide Financial Corp. in 2008 and Merrill Lynch & Co. in January, said Ken Thomas, a Miami-based banking consultant who analyzes branch locations.
“You need to trim your branch network periodically just as you would weed a garden,” said Thomas. “There is always excess fat to be removed.”
The bank is ahead of projections in achieving $7 billion in annual pretax savings from the Merrill acquisition, Chief Financial Officer Joe Price said on July 17. The savings include eliminating 35,000 jobs by 2011.
Net U.S. branch openings jumped to 3,475 in 2008 from 571 in 2000 as banks expanded with housing growth in suburban markets, Richard Bove, an analyst at Rochdale Securities Inc., said in a report yesterday. Bank of America has too many branches and needs to boost prices to improve profit and prepare for increased government regulation, he said.
Full Story: Bloomberg.com
