WASHINGTON, July 19, 2017 – Wells Fargo has launched an initiative to cut expenses by $2 billion by the end of 2019. This goal will be accomplished in part by eliminating 450 local branches across the country. Wells Fargo currently operates the largest branch network in the United States.
Earlier this year, Wells Fargo had already begun closing 93 branches and is close to closing 200 branches in total this year. By 2018, they intent to close an additional 250 branches. Wells Fargo is not alone in closing branches, however. Bank of America and JP Morgan Chase have been shutting down local branches for several years.
Wells Fargo says the increase in online and mobile banking is the primary reason behind its drive to reduce local branches. The bank clearly regards it as more cost-effective to serve increasing numbers of its customers through digital and online services delivered via home and laptop computers as well as increasingly popular financial apps for mobile devices.
JPMorgan Chase reports that it costs $0.65 to handle a deposit transaction in a branch vs. $0.08 per ATM transaction and just $0.03 per mobile deposit. Wells Fargo currently has 27.9 million digital customers and only 23.6 million primary checking customers.
Even with the announced closings, Wells Fargo currently has more than 6,000 branches across 39 states. A UBS business analysis found that a majority of Wells Fargo branches were within a five-minute drive from another Wells Fargo branch, giving a further rationale to the bank’s branch closing strategy.
Said Wells spokesperson Staci Schiller in a press release,
“We continue to evaluate our branch network, and base our physical distribution strategy on customer behavior, market factors, economic trends and competitor actions. While branches continue to be important in serving our customers’ needs, our investment in digital capabilities has enabled us to seamlessly serve our customers across channels and provide choice in how they bank with us.”
Wells estimates its latest branch consolidations and other moves should result in $4 billion in annual cost cuts, which should help offset recent setbacks to its balance sheet. The bank’s expenses have climbed recently, driven in part by hiring more workers and increasing employee pay, as well as by costs related to its recently resolved business solicitation scandal, which led to the ouster of its former CEO.