Large regional banks are closing branches to cut costs as consumers increasingly turn to electronic banking.
The latest announcement comes Thursday from KeyCorp, which exclusively told this newspaper it plans to close May 10 a Dayton area branch office at 3019 Kettering Blvd., and consolidate the office with a nearby branch on Far Hills Avenue. It is part of 40 to 50 branches Cleveland-based KeyCorp officials say are targeted to close in the year ahead to save money.
No jobs are being eliminated, KeyBank spokesman Dan Davis said.
Earlier this week, PNC Financial Services Group said it plans to close about 200 branch offices in 2013, including a downtown Springfield location that shut down Feb. 22.
The news follows an announcement last month that JP Morgan Chase & Co. would chop thousands of jobs, the bulk of which are in mortgage banking.
PNC has not named any more local closings, but KeyBank’s cuts that started in 2012 included offices in Trotwood and Cincinnati.
Consumers increasingly use their cellphones and computers to check their bank accounts, deposit money or transfer funds. Financial services are cheaper to offer through technology than at brick-and-mortar offices, and banks won’t need as many branches as they have now in the future, said Dan Werner, an equity analyst in Chicago with research firm Morningstar Inc.
The cuts are being fueled by pressure on profit margins. Prolonged low interest rates are crimping revenues because the main source of income for financial institutions is the difference in interest collected on loans and earned on investments, and the interest paid on deposits.
Personnel and facilities are a bank’s biggest costs, Werner said.
“In order to maintain profitability they’re taking a hard look at all their cost structures,” he said. “If they can gather deposits and make loans through cheaper methods they’ll try to push customers to that.”
Incoming PNC CEO William Demchak told investors Tuesday that PNC would close more offices this year and focus on better serving customers in a digital world. Last year PNC closed 65 retail branches across its footprint. PNC, based in Pittsburgh, Penn., has 2,900 branches in 19 states and Washington, D.C.
So far 32 branches have been identified to close the first quarter of this year.
“The profit model for retail banking has been changed by new regulation and the low-rate environment that appears to have become our new normal,” said Demchak, speaking at the Citigroup financial services conference in Boston.
PNC will still open some new branches but “our focus in terms of building infrastructure to support the retail business will be weighted far more in the direction of technology than teller lines,” he said. “Customers want convenience in their banking options, and with advances in ATM technology, web-based banking and the proliferation of smartphone and mobile apps, customers have less need to visit a branch than ever before.”
PNC is the third largest bank by deposits in southwest Ohio, according to the Federal Deposit Insurance Corp.
Cleveland-based KeyCorp is in the process of a two-year effort through the end of 2013 to cut $150 to $200 million in operating costs, which resulted in the closure of 19 underperforming branches in 2012.
Key is Dayton’s fourth largest and Cincinnati’s ninth largest bank.
“As communities change, the 3019 Kettering Blvd. branch has seen many of its customers shift their business to other nearby KeyBank branches,” Davis said.
JPMorgan Chase & Co., one of Ohio’s top 10 employers, said at the end of February it plans to cut 17,000 jobs company-wide by the end of 2014.
“The bulk of the reductions are in mortgage banking. Fewer homeowners are falling behind on their mortgages, so we need fewer employees to assist those who are struggling,” said Chase spokeswoman Emily Smith in an email. “Ohio is a major market for Chase and impacts to employment will be minimal.”
Chase has nearly 300 branches in Ohio.
First Financial Bancorp of Cincinnati also closed 10 offices in February across its Indiana, Ohio and Kentucky footprint.
Bank branch closings
Here are branch closings announced nationwide:
- PNC Financial Services Group plans to close about 200 branch offices in 2013
- Cleveland-based KeyCorp has targeted 40-50 branches to close in 2013
- Cincinnati-based First Financial Bancorp closed 10 branches in February
- JPMorgan Chase & Co. plans to cut 17,000 jobs by the end of 2014