Posted on 11/23/2010 7:15:05 AM PST by WebFocus
he bank shakeout is about to pick up steam.
So says Meredith Whitney, the analyst who made headlines around this time three years ago by predicting the demise of Citi's (C) dividend. Whitney predicts in a report released Monday afternoon that profit-strapped U.S. banks will close 5,000 branches over 18 months.
That would amount to about 5% of bank offices, and would mark a new twist in a decades-long consolidation process.
There were more than 12,000 U.S. banking institutions as recently as 1992, but deregulation and global competition have fed the rise of megabanks like Bank of America (BAC) and JPMorgan Chase (JPM).
At the same time technological and regulatory shifts have made it harder to make a living as a small banker, fueling a feeding frenzy by bigger players at the expense of the smallest banks. The U.S. bank count slipped below 8,000 this year for the first time ever.
Until now, the feeding frenzy hasn't actually resulted in fewer branches for consumers: While the number of federally insured commercial banks has dropped 18% over the past decade, the bank branch count actually surged 28% over the same span, according to FDIC data.
But Whitney says regulatory reform may change all that. Efforts such as this summer's Dodd Frank Act will keep a lid on bank profits and expand the already ample universe of customers who aren't worth chasing, she says. Something will have to give and the branch down the street may be it.
"The most regrettable unintended consequence of some of the quickly written regulatory reform, we believe, will be the inevitable 'de-banking' of the U.S. financial system," she writes in a report that warns that bank profits are in "structural decline."
(Excerpt) Read more at finance.fortune.cnn.com ...
Thanks Obama!
We have too many banks here in San Diego. Almost every intersection, but not much real traffic in them. It is a waste of city space and they drive out the small merchants.
They seem to go from being one bank to another on the same property.
The too big to fail banks are also too big to not profit, while the smaller banks are dropping like flies. Why do we need large national banks? Beats me..they are really just mortgage brokers and any big business loans are always consortiums..
Unmentioned is the fact that branches are not required. With direct deposit by customers and electronic payments to vendors, the need is drastically reduced.
The “Bank of Mason” and the “Bank of Sealy” are thriving in the Obamanation......
That the banks have been able to continue as long as they have with their bloated overcapacity is what this administration is responsible for.
When most intersections in this city have 4 or 5 bank branches we have a severe banking overcapacity. Remember banks facilitiate transactions, when they are efficient, but they do nothing productive in and of themselves.
Consolidating and downsizing this behemoth is not bad news. It is good news. It means that even for banks market forces have some effect.
I haven’t been inside a bank for years, but they just keep building them, I don’t get it.
That would be a real change, because it seems that small bank branches have been springing up all over the place. I couldn’t really understand it, as I never ever go to my bank.
‘we believe, will be the inevitable ‘de-banking’ of the U.S. financial system’
This is bad?
Walmart-ization?
I’m old, and I can remember a little gas/groceries/cigarettes/candy store every fourth crossroad or so hereabouts. Today it’s about every fortieth, and a good percentage of the stores are cookie-cutter multiples or ambitious local chains.
Just like the rest of you, we’ve been seeing thousands of these branches sprout up all over our fair city; much like the days when there was a gas station on every corner.
But......we may be missing the bigger point here, i.e., that with the squeeze on banks profits it may be harder for people to qualify for an account, hence Baxter’s line about banks not chasing marginal customers. It was pretty obvious that, for example, Wamu would chase nickel and dime acounts just to charge an over draft fee. Those days are history........so what’s the “little” guy to do if you have to make a minimum deposit of $1000.00 to open an account and have to maintain a minimum balance of $1000.00 to keep the account open?
This could become another dog chasing it’s tale down the rathole of doom for many in that, “He can’t get a job without a bank account, but he can’t get the account because he doesn’t have a job......”
I understand from acquaintances in the banking business that it is not just that easy to close a bank branch. You have to get permission from Der Fuherer first. For example, if you want to close one in a bad part of town with declining deposits and a high risk of armed robbery, you have to run the gauntlet of charges of “Racism!” from all the usual suspects.
Generally the only times I go into a branch are to get small change I can't get out of the ATM or for my annual coin deposit where I dump a bucket of coins into the coin counting machine. If more and more people are acting that way by using direct deposit, ATMs, and even applying for account and loans over the web, then the branches become redundant other than as a place to keep safe deposit boxes.
Even for a primary savings account I dumped the local branch bank and picked an internet bank to get 30 times the interest rate paid, so the local bank only serves as a temporary transfer account for my savings.
The Chase bank that I visit everyday has ten teller windows, but usually only one is open. Little activity is evident. I don’t see how they keep the doors open.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.