As customer and deposit growth has become more challenging, banks are looking to new markets and sub-markets to drive that growth, and de novo investments are viewed as a reliable source. This approach steps up a multi-year trend in the making.
Over the last five years, supported by behavioral changes brought on by the pandemic, the top 100 U.S. banks reduced their branch presence by 5% per year in markets where their branch share was greater than 10%. But in markets where their branch share was less than 5%, they reduced it by only 2% per year (see chart at left). And while the trend is similar for the most recent year (as recently reported by the FDIC), there’s one noteworthy difference: an acceleration of de novo investment in markets where banks have less than a 5% share (see chart at right).
Curinos generally agrees with this strategy, but banks need to proceed with caution. Building brand awareness in thinly branched markets is challenging, and many de novo investments don’t measure up to their pro forma projections. That makes precision analytics in network planning and marketing, including those offered through Curinos’ Deposit Optimizer, all the more critical in increasing the likelihood of success.
Increasingly, banks have been investing in markets with low branch density while continuing to reduce their presence in more densely branched markets.
5-Year Branch Shifts by Market Density
(Top 100 Banks)
1-Year Branch Shifts by Market Density
(Top 100 Banks)
Source: Curinos BranchScape, FDIC Jun 30, 2024, Top 100 Banks in U.S.
