Fifth Third trims branches
Internet, mobile apps are triggering changes at banks and credit unions.
Fifth Third Bancorp in Cincinnati has announced it will move forward on its “expected” changes to its branch network — namely, the consolidation or sale of about 100 branches, as well as the sale of about 30 properties it had purchased previously for future branch expansion.
“Consumer demographics and our customers’ preferred channels of banking are undergoing significant changes,” said Kevin T. Kabat, vice chairman and chief executive officer of Fifth Third Bancorp.
“Technology continues to impact our service delivery and revenue generation tactics and strategies. We have been very successful in growing our market share in our footprint as the most recent FDIC data clearly shows, and we will continue to maintain the same focus going forward by optimizing the size and density of our branch network.”
Kabat added that “meeting the evolving preferences of how our customers interact with us is our top priority. Over the past several years, we have made significant improvements to our mobile banking options and our sales and staffing models and plan to tailor our branch network in concert with these changes.”
Gregg Dimkoff, a professor of finance at Grand Valley State University’s Seidman College of Business who has taught banking classes in the past, said he suspects “this is just the tip of the iceberg for large banks. Over the next few years, we will see a lot of banks close down their unprofitable branches.”
Dimkoff said people in their 20s and 30s are major users of online banking, ATMs and smartphones to deposit checks at their banks. Fifth Third, he said, is “adjusting to the technology.”
In connection with the plan to eliminate branches, Fifth Third said it will incur approximately $75 million to $85 million in non-cash impairment charges to be seen in the second quarter of 2015. The company also expects to incur $6 million to $10 million in other costs, primarily related to real estate contract terminations.
Fifth Third Bancorp said it expects the actions will result in annualized reduction of approximately $60 million in ongoing operating expenses, and are expected to be fully completed by mid-2016.
Dimkoff does not believe the situation reflects serious financial trouble at Fifth Third; rather, he said it is an old bank with a lot of branches, and “the old business plan of brick and mortar facilities everywhere — that’s what people wanted. But that is changing.”
In its year-end report released in January, Independent Bank of Ionia said it will close six branch offices this year.
Independent Bank President and CEO Brad Kessel said the ways “in which we interact with our customers continues to evolve. Branch transaction volumes are declining, while mobile and other electronic channels continue to experience greatly increased usage.”
Independent’s branch closings were part of “necessary adjustments in response to these changing transaction patterns,” according to Kessel.
John Buckley, president and CEO of Gerber Federal Credit Union in Fremont, told the Business Journal a few months ago the most striking thing about its millennial customers is how they access their financial services.
“We see that convenience is king,” he said. Millennials want access to their accounts “on their schedule, not necessarily our schedule,” and they do not want to have to drive to the bank or credit union to deposit a check. They can do that by photographing the check with their smartphone and using an app to instantly send it electronically for deposit.
As of March 31, Fifth Third Bancorp (NASDAQ: FITB) had $140 billion in assets and operated 15 affiliates with 1,303 full-service banking centers, including 101 in grocery stores, plus 2,637 ATMs in a dozen states from Michigan to Florida.