Should You Be Worried About Soaring Bank Closures?

The numbers are in on which banks closed the most branches in 2013. Should investors run, or is now the time to buy?

Feb 26, 2014 at 7:00AM

In 2011, published an article suggesting, "For the first time in 15 years, banks across the United States are closing branches faster than they are opening them."

Here we are four years later and banks are continuing to trim back locations at a remarkable rate. In fact, SNL Financial suggested, "Banks collectively reduced the U.S. branch total by 1,487 locations in 2013."

Bank Close

Source: SNL Financial.

Banks cutting branches
Bank of America (NYSE:BAC) led all banks lowering its branch count by 189, and PNC (NYSE:PNC) wasn't far behind lowering its count by 160.

PNC CEO William Demchak noted the company improved its efficiency ratio to 61% from 68% last year. While this is a significant improvement, Demchak explained, "[O]ur expenses are higher than they should be and we're focused on doing something about it." 

Bank of America's CEO Brian Moynihan is also doing something, and that's observing customer behavior. According to Moynihan, over-the-counter transactions are down, while ATM, online, and mobile have been rising. 

It's clear the industry is changing, and more customers are banking online. This should give investors confidence that scaling back branches won't hurt bank's long-term future. 

Cost-cutting and profitably, however, are also at the core of reducing branch count. This is because of the four banks with the most closures in 2013, not one has positive revenue growth since 2010.

BAC Revenue (Annual) Chart

Bank of America revenue data by YCharts.

Banks adding branches
According to SNL Financial, JPMorgan Chase (NYSE:JPM) and Huntington Bancshares (NASDAQ:HBAN) have been able to buck the tide of higher compliance costs and a slow loan growth, raising total branch count by 34 and 8, respectively. 

Among the banks that increased branch count in 2013, JPMorgan is the outlier. According to CFO, Marianne Lake, there were a few holes to fill in California and Florida, but the bank suggested it's now satisfied with its current footprint. 

Huntington Bank, on the other hand, looks primed to continue growth. It's a very strong regional bank with top-rated customer service, and one of the best at cross-selling customers. Moreover, Huntington Bank, along with US Bancorp and BankUnited, was able to grow revenue since 2010 -- despite significant headwinds. 

JPM Revenue (Annual) Chart

JPMorgan Chase revenue data by YCharts.

Should investors be worried about bank closures?
A number of the healthiest banks are decreasing branch counts. With that said, there are signs investors shouldn't be too worried. One, in particular, is deposit growth. 

According to Moynihan, "Deposit levels continue to reach records each quarter." PNC, similarly, grew deposits by 4% year over year.  This is a great sign that customers aren't running for the hills due to decreasing branch counts. The industry's push toward greater efficiency should, ultimately, allow banks to be in the best position to prosper as the economy continues to strengthen.   

Which banks are the best buys? 
Looking at the market as a whole, I believe some of the best values lie in the financial sector. While some banks are adding branches and others are trimming back, I see value across the board.

In particular, I like Huntington Bancshares customer-centric approach and growth potential. And on the other side, Bank of America is trading at a favorable valuation, has a very strong market position, and an industry-leading wealth management segment.

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Dave Koppenheffer has no position in any stocks mentioned. The Motley Fool recommends Bank of America. The Motley Fool owns shares of Bank of America, Huntington Bancshares, JPMorgan Chase, and PNC Financial Services. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

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