Are Bank Branches Suffering From Overconstruction?

This explosion in bank branch construction was caused in part by a relaxing of state and federal regulations governing bank branches, but also because branches account for about 80% of bank sales. In the last several years, bank branch construction has slowed and for some commercial banks, it has started to reverse.

The credit crisis of 2009 causes many banks to be absorbed. Chase Bank took over Washington Mutual; Wachovia was folded into Wells Fargo. In July 2009, Bank of America announced plans to close up to 10% of its branches, starting a downward trend that has continued as banks seek more efficiencies.

In many cases, the closures will go unnoticed, since they are being focused on larger cities whose branch growth resulted in more branches than required for the population centers. Since online banking is also taking a share of the demand, the bounce back from bank branch overconstruction will be relatively painless for consumers while providing new efficiencies for commercial banks, who pay $300,000-$400,000 per year for the operation of each branch, in addition to the typically $2 million required to open a branch.