Although the coronavirus pandemic has made bank branches look like a thing of the past, JPMorgan Chase's (NYSE:JPM) consumer market expansion continues to make progress, as the bank opens more new branches and gathers deposits at a healthy clip.

In 2018, the bank announced a $20 billion investment that would add 400 branches in new markets over a five-year period. On JPMorgan's recent earnings call, CFO Jennifer Piepszak announced the bank had just opened its 100th branch of the expansion, with plans to open another 75 more this year.

Let's see how the market expansion is faring thus far.

ATMs inside a Chase bank branch.

Image source: JPMorgan Chase.

Building quickly

Most of the branch expansion efforts so far have targeted five main markets: Massachusetts, Pennsylvania, Virginia, Maryland, and Washington, D.C. Roughly 77 of the 100 new branches opened as of June 30 of this year were opened in these five states, according to the FDIC. In 2018, when the initiative began, JPMorgan only had one retail branch or none at all in all of these states.

State Deposits 2020 (Millions) Deposits 2019 (Millions) Branches 2020  Branches 2019  Deposits/Branch (Millions)
MA $657.1  $178.7 20 6 $32.9
PA  $399.8 $110.8 19 3 $21.0
VA $364.5 $108.1 8 1 $45.6
MD $326.1 $55.1 14 2 $23.3
D.C. $309.9 $105.8 16 6 $19.4

Data source: FDIC 2020 Deposit Market Share Report.

The bank has been growing deposits at a healthy clip over the last year. In Massachusetts, one of the most heavily banked states in the country, JPMorgan has grown deposits by close to $500 million. In most of the other states, deposits have at least tripled, aside from Washington, D.C., which is just shy of tripling.

But is this good? There are a few different sources we can compare these numbers to. Guenther Hartfeil of the Peak Performance Consulting Group studied all U.S. branches in 2017 and found that a branch typically needs $25 million in deposits to break even. Additionally, he said that banks typically want to double this number for a solid return on investment, meaning they want to grow a branch to $50 million in deposits. By this measure, JPMorgan is doing pretty well, especially when you consider many of these branches have only been open for a very short amount of time. Virginia was averaging more than $45 million per branch as of June 30, while Massachusetts was at nearly $33 million per branch.

But according to the FDIC's 2019 Summary of Deposits highlights, the average U.S. branch had $148 million per office between June 30, 2018 and June 30, 2019. This is obviously skewed by the big banks. For instance, if you look at JPMorgan's largest state market in New York, the bank had $739.1 billion in deposits in the Empire State and 727 branches for an average branch deposit size of more than $1 billion. I want to stress that a number of JPMorgan's new branches have likely only been open for a few months.

All good signs

As Boris Schlossberg, managing director of FX strategy at BK Asset Management, recently said on CNBC, "JPMorgan is a brand that does everything well." The bank continues to prove that point with its retail expansion.

To be clear, I am not saying that the bank is going all in on physical branches as the industry as a whole continues to pull back. In fact, JPMorgan's branch-wide footprint shrank by 60 between June 30, 2019 and the same time this year.

But if the nation's largest bank truly wants to be the Apple of banking, as Schlossberg also recently said, it will want to have some kind of retail presence in every state. It will especially want to be in large metropolitan areas, where it shouldn't be hard for the bank to leverage its brand and resources to compete with other banks on deposits and other lines of business. Currently, the bank is in 38 states plus Washington D.C., and in many of those states, it's still building up its presence. If the early signs are an indication, then JPMorgan can certainly continue to grow deposits and market share in a big way.

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