Released: August 09, 2006

National resurgence of branch banking

Source: By Eric Dash, New York Times (Free Registration)

At the intersection of 32nd Street and Park Avenue in Manhattan, a Citibank branch sits on the northeast corner. A Commerce Bancorp branch is across the street. A North Fork bank stands over the southwest side. And taking up the fourth corner spot: a new branch for J. P. Morgan Chase, which is not more than a short sprint from an HSBC banking center up the block.

Too many bank branches? Maybe. Big banks have been on a branch building binge in the last few years, trying to grab and hold onto customers. But this recent push may be nearing its final frontier.

Deposit growth is expected to slow, and some data suggests that banks are stealing customers from each other rather than enlarging the overall size of the market. Higher interest rates and new Internet-only savings accounts have led some consumers to move their money into products offering higher yields. And prices for bank real estate have been soaring nationwide, especially in New York.

“I just think the building frenzy in branch banking is probably nearing its peak,” said Vernon W. Hill, Commerce Bank’s chairman and chief executive, who is credited with igniting the branch building boom in Manhattan, starting in 2001. “Maybe I am dreaming, but I think we are going to look back at this period and say this is the top.”

Kenneth D. Lewis, Bank of America’s chairman and chief executive, said, “We think there is some saturation, but that is typical for banking where there is a herd instinct.” But even though it may seem as if there is a branch on every corner, industry executives argue that most major American cities are still open to more banking. In metropolitan areas like New York, Los Angeles, Miami and Washington, the amount of money that retail banks are taking in is significantly outpacing the number of new branches being built.

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