What’s driving closures:
- Decades of low interest rates squeezed banks’ profits. Many opted to cut costs by closing branches.
- The pandemic triggered a massive migration to digital banking.
- Large banks vying for market share often acquire smaller banks to expand their footprint. But as they extend their reach, they don’t always increase their number of branches.
Our take: The number of monthly branch closures fell to 49 in January, well below the trailing-12-month average of 161. But it's still necessary to consider the wider industry climate:
- Banks will continue to spend on digitization as they try to attract digitally native Gen Z customers.
- Some banks are running into regulatory hurdles regarding proposed mergers. First Horizon and TD recently said their deal likely won’t meet its deadline. As a result, banks in deal talks are launching community benefits plans that include branch openings. But some banks are not delivering on their promises.
Fierce competition from digital banks, fintechs, and Big Tech—along with banks’ desire to increase deposits, cut costs, and nab Gen Z wealth—signal that the bank branch closure trend is here to stay.
This article originally appeared in Insider Intelligence’s Banking Innovation Briefing—a daily recap of top stories reshaping the banking industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.