4-minute Read

Big banks like PNC Bank and JPMorgan Chase filed for closing several of their branches in multiple states last week. 

During the week of November 12th to 18th, there was a notable series of branch closure filings by several banks, with PNC Bank leading the pack, based on data sourced from the U.S. Office of the Comptroller of the Currency. The city of Pittsburgh accounted for the highest number of closures, with 19 branches affected. These closures were distributed across five branches in Pennsylvania, four in Illinois, three in Texas, two each in Alabama and New Jersey, and one each in Indiana, Ohio, and Florida. 
 
A significant catalyst for this surge in branch closures is the rise of digital banking, gaining momentum during the pandemic when individuals were confined to their homes. A survey conducted by the American Banking Association (ABA) in September reported this shift, revealing that eight out of ten Americans utilized a mobile device to manage their bank accounts at least once in the preceding month. As the financial landscape continues to evolve, an industry-wide adaptation to a digital-centric standard. 
 
By The Numbers
JPMorgan Chase, Citizens Bank, Bank of America, and Citibank collectively submitted filings for the closure of 64 branches. This wave of closures aligns with a trend of long-term branch shutdowns that have been unfolding over the past several years. A report from the National Community Reinvestment Coalition reveals that between 2017 and 2021, 9% of all bank branches ceased operations, and this closure rate doubled during the COVID-19 pandemic. 
 
S&P data indicates that in the previous year, there were 3,012 branch closures and 958 branch openings, resulting in a net closure of 2,054 branches. Remarkably, this marked the third consecutive year in which net closings exceeded 2,000 branches. 
 

Cost Saving 

The shift towards digitalization, as opposed to the expansion of physical branch locations, constitutes a vital cost-saving strategy for banking institutions. The establishment of a new branch demands a substantial financial investment, with initial costs amounting to millions of dollars and additional annual recurring expenses totaling several hundreds of thousands. 

Today, the majority of tasks traditionally conducted at physical banks can be seamlessly performed online. Digital transactions prove to be more cost-effective compared to in-person transactions facilitated by bank tellers. However, the closure of bank branches can have significant repercussions for customers, particularly in small towns. This has led to the emergence of “bank deserts,” where the nearest bank is situated more than 10 miles away. 

“When bank branches close, there are several adverse effects on the surrounding community. Small business lending and activity in the area declines. More people use alternative financial practices. An important commercial tenant and employer are lost,” the National Community Reinvestment Coalition report said. 

“While consumers have embraced mobile internet banking to one degree or another, they clarify that branches matter to them as well, and without branches nearby, they are more likely to be un-or under-banked.” 

PNC Bank

PNC Bank reported the largest number of closure filings during its focus on cost-saving measures. During the Q2 earnings call, CEO William Demchak stated that the bank was “…going to have to take a hard look at where we can generate savings in this company without cutting the potential for growth.” 

During that period, CFO Robert Reilly announced an increase in the target of an expense reduction program by $50 million, bringing it to $450 million. Looking ahead, PNC Bank is aiming for $725 million in expense cuts for the upcoming year.  

Back in August, PNC implemented a strategic move by shutting down 29 branches, following the previous 47 closures in June. A spokesperson told the U.S. Sun at the time that the bank intends to shut down 147 locations as it focuses more on online banking. The closures were expected to make 60% of PNC’s banking business exclusively online.  

Last month, the bank reported a decline in Q3 profits and announced a workforce reduction of approximately 4%. The layoffs, which began on October 6th, are anticipated to be completed by the end of the 4th quarter, with the objective of reducing the bank’s annual personnel expenses by approximately $325 million, constituting a 5% reduction. These strategic measures reflect PNC Bank’s commitment to aligning its operations with evolving industry trends and optimizing its financial performance. 

High Inflation has given Workers a 3% Pay Cut The Bottom Line

Financial institutions are actively pursuing strategies to manage expenses and safeguard their earnings. Among the fluctuations in the banking industry, gold emerges as a tangible asset unaffected by these dynamics. Enhance the diversity of your financial portfolio by considering an investment in gold. 

 

Connect with Reagan Gold Group (RGG) when navigating the world of precious metals. We provide gold and silver investment solutions tailored for challenging economic climates and heightened international tensions. Contact Reagan Gold Group today to explore how incorporating physical gold and silver into your portfolio can hedge your financial future. 

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