The Star-Ledger

Bank Of America To Shut Some Branches

The Star-Ledger — Wednesday, July 29, 2009

By Joseph R. Perone / Star-Ledger Staff

Bank of America's decision to close a substantial number of branches over the next few years is a reflection of cost-cutting in the banking industry and changing trends among customers who bank online.

The question is how many retail locations will go. Chief executive Ken Lewis told investors last week the bank would cut as many as 10 percent of its 6,109 branches nationwide, according to a report in the Wall Street Journal.

However, the bank backpedaled yesterday and said it did not plan to cut that many locations. The bank with the largest retail presence in New Jersey had 397 branches in the state as of last year. A Bank of America spokeswoman did not return phone calls yesterday.

The nation's largest bank, which has been under scrutiny because of government regulators' role in forcing a merger last year, needs to cut costs after a string of acquisitions that include Countrywide Financial and Merrill Lynch, analysts said.

"It probably makes some sense, given all of the acquisitions the company has done," said Matt Burnell, managing director for Wells Fargo Securities in Charlotte, N.C. "Banks usually cut between 5 percent and 10 percent of their branches after an acquisition. If you have a Merrill Lynch office and a Bank of America branch in Summit, that is probably redundant."

Bank of America said the precise number of branches to be eliminated has not been decided.
"We don't have a final plan for the ultimate number of branches," said James Mahoney, head of corporate communications for the bank holding company. "Our vision is the network will be managed downward over time."

Bank of America's decision to shut branches is part of a larger trend in which financial institutions are adjusting to younger customers who do most of their banking online, according to John McWeeney Jr., co-president of the New Jersey Bankers Association, a Trenton trade group.

"The younger generation is more technology oriented, and some of that business will be transferred from branches to online," he said.

Another trend is that even though the number of banks has shrunk over the years, most continued to expand and are now faced with too many branches, McWeeney said.

"You're going to see all banks, including community banks, take a look at their branch levels," he said. "You will see fewer branches in the future, and the ones that will remain will be large branches."

Still, Bank of America might have to shut some branches, but probably not 600, according to Joseph Morford, banking analyst for RBC Capital Markets.

"I'd be a little surprised if they followed through on something of that magnitude," he said. "Younger people are going online, but the physical presence is still important in attracting new customers, so there is value in having bank branches."

Bank of America has nearly a 16 percent market share in New Jersey, according to Federal Deposit Insurance Corp. data from June 2008, the most recent available. It is followed by Wachovia, now owned by Wells Fargo, TD Bank National Association, PNC Bank and Hudson City Savings.

A reduced retail presence would be felt most by people of modest means, according to Phyllis Salowe-Kaye, executive director for New Jersey Citizen Action, a watchdog group.

"It would be horrific in New Jersey if Bank of America closed branches," she said. "It's one more thing to discourage low- and moderate-income people from using banks. Instead, they will use check-cashing businesses and bad mortgage companies."

Bloomberg News contributed to this report.

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