Wells Fargo has started an initiative to cut expenses by $2 billion by the end of 2019 and that is done partially by eliminating 450 branches across the country. They originally operated the largest branch network in the United States, with almost 6,000 locations.
Earlier this year Wells Fargo had already begun closing 93 branches and is close to closing 200 branches total this year. By 2018, they intent to close an additional 250 branches. Wells Fargo is not alone in closing branches, Bank of America and JP Morgan Chase have been shutting down branches for several years.
Company executives say the increase in online and mobile banking is the reason behind closing its branches. It’s more cost-effective to serve customers through digital services. JPMorgan Chase has reported that it costs $0.65 to handle a deposit transaction in a branch, $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 closings, Wells Fargo still has more than 6,000 branches across 39 states. A business analysis from UBS found that a majority of Wells Fargo branches were within a five-minute drive from another Wells Fargo branch.
“We continue to evaluate our branch network, and base our physical distribution strategy on customer behavior, market factors, economic trends and competitor actions,” said Staci Schiller in a Wells Fargo press release. “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.”
They estimate latest branch consolidations and other moves should result in $4 billion in annual cost cuts. The bank’s expenses have climbed recently, driven in part by hiring more workers and increasing pay, as well as costs related to the accounts scandal.