Big Banks Bet on Slick New Branch Model

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Many banks, particularly large institutions like Bank of America (NYSE: BAC  ) and Citigroup (NYSE: C  ) , have been on a cost-cutting binge for the last year or so, and one casualty has been bank branches. Indeed, as banks work to segue customers into online and mobile banking, many locations have been deemed an unnecessary drain on company resources. In 2012 alone, all U.S. banks closed nearly 2,300 branches, while opening only half that number.

But, the reports of the death of branch banking have been greatly exaggerated, as it turns out. Bank branches are simply being reimagined, and new, more modern sites are being unveiled by B of A, Wells Fargo (NYSE: WFC  ) , and JPMorgan Chase (NYSE: JPM  ) even as clunky, older locations are shuttered.

New economic reality
It's true that over 2,000 branch closings is quite a bit for one year, but banks are realizing that it isn't cost effective to maintain locations in sparsely populated areas. As those branches are trimmed, new, more technology-dependent locations are springing up in larger urban areas.

Wells Fargo recently opened a branch in what it calls the "neighborhood bank format," in Washington, DC. Wells notes that the tiny, 1,000 square-foot site is a big change from its usual branch size, which is usually three to four times the new location's footprint. The branch will offer large-screen ATMs as well as a paperless business concept, with employees using wireless phones and tablets to serve customers.

JPMorgan has introduced its own new branch style, with interactive ATMs as well as tablet-toting clerks and cash-counting machines. These modern improvements will eventually grace all of the bank's new sites, but the company doesn't plan to roll out the changes for current locations.

Adding to the bottom line
For Bank of America, its new branch concept has more riding on its success than just saving money. The bank will have all the accouterments of its peers' snazzy new sites, though its footprint will be gargantuan -- 12,000 square feet -- compared to that of Wells.

That's because B of A is planning to make its new branch sites a kind of mini-banking center , where customers can videoconference with remote advisors, and do practically any transaction that would normally be available only at a main bank location. One transaction that B of A is pushing at these brand-new sites is mortgage lending.

Even as the mortgage business cools, Bank of America's CEO Brian Moynihan disclosed in the bank's first-quarter earnings call that the plan is to increase the number of mortgage banking specialists in branch locations, as well as processing staff for the back office. CFO Bruce Thompson noted that this drive has helped boost mortgage originations by 57% year over year.

As a B of A executive recently commented, customers still want the face-to-face banking experience. The biggest banks are figuring out how to give consumers what they want in that arena, while still containing costs and increasing profits. The reinvented branch model is still new, but it definitely looks like a step in the right direction.

Bank of America's stock doubled in 2012. Will new super-branches help 2013 top that feat? With significant challenges still ahead, it's critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool's premium research report on B of A, analysts Anand Chokkavelu, CFA, and Matt Koppenheffer, Financials bureau chief, lift the veil on the bank's operations, including detailing three reasons to buy and three reasons to sell. Click here now to claim your copy.

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