Lately, the banking industry is increasingly pursuing restructuring measures with its services being more electronically inclined. JPMorgan Chase & Co. (JPM) is set to shut down around 300 bank branches, reflecting 5% of it its total branch network of 5,602, over the next two years.
The plan of branch closures was revealed in a presentation in the bank’s annual investor day conference and is an effort to focus more on advising retail banking clients rather than operating everyday transactions. Notably, JPMorgan has closed 28 branches in 2014.
Branches are gradually becoming less important for banks as customers prefer to connect with banks though the internet and mobile phones. Such modes of communication not only save time for a customer, avoiding physical visit to a branch, but also saves costs for a bank. Processing daily transactions become less expensive for banks compared with processing in a big set up with more staff.
Several other banks that have taken similar moves in recent times include, Bank of America Corp. (BAC), Citigroup Inc. (C) and BOK Financial Corp. (BOKF).
JPMorgan also revealed in the conference that it intends to achieve annual cost savings of $1.4 billion, primarily in its consumer and investment banking. It expects expense reduction of $2.8 billion (excluding legal costs) in its investment banking business and around $2 billion in its consumer banking business.
Management anticipates expenses to be nearly $57.0 billion in 2015, declining from $58.4 billion in 2014.
Further owing to regulatory pressure to maintain higher capital levels for large banks, JPMorgan also intends to offload $100 billion of non-operating deposits.
Amid tougher regulatory conditions and challenging revenue environment, we remain encouraged by the initiatives to be taken by the Wall Street banking giant that are likely to strengthen its financials in the long run.
Currently, JPMorgan carries a Zacks Rank #3 (Hold).
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