Fifth Third pays the price as customers exit the branch

Fifth Third Bancorp is to incur charges of $95 million to shrink its branch network after performing an abrupt about-turn on earlier plans to extend its high street presence.

Fifth Third expects to consolidate or sell approximately 100 branches and approximately 30 other properties purchased earlier for future branch expansion.

The bank currently operates 1303 full-service branches and 101 'Bank Mart' locations inside select grocery stores.

The Ohio-based bank cited changes in consumer demographics and a preference among customers for online and mobile channels for the shift in thinking. It expects to reap $60 million in annual savings by mid-2016 as it right-sizes the branch network.

Kevin Kabat, vice chairman and chief executive officer of Fifth Third Bancorp, states: “Technology continues to impact our service delivery and revenue generation tactics and strategies. We have been very successful in growing our market share in our footprint as the most recent FDIC data clearly shows, and we will continue to maintain the same focus going forward by optimising the size and density of our branch network.”

The bank says it will incur approximately $75-85 million in non-cash impairment charges in the second quarter of 2015. It also expects to recognise approximately $6-$10 million in other costs, primarily related to real estate contract terminations.

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Fifth Third Bank

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It is interesting to read this story along with the other one on Atom bank making a deal with a mainstreet lender to establish a physical presence. Both are examples of extreme strategies meeting the ground reality of multi-channel delivery needs. Many of the bank functions, such as self service A2A transfer, are much better served digitally, while others such as financial advice, getting a deep understanding of the target customer, or dealing with physical instruments is much more effective physically. The banks that master the balance will be the success stories of the future.

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A Finextra member 23 June, 2015, 19:46

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I agree that banks that master the balance of "face-to-face" and digital will be the success stories of the future. However, the balance is much more to digital than physical (as in branches). Why? Because, face-to-face can also mean meeting at the clients home.

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Dinesh Katyal - Financial Data Exchange - San Francisco Bay Area 24 June, 2015, 18:14

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That's likely right. Imagine a banker coming to my place of business, and poring over the financials, and evaluating business health to suggest financial products, and provide financial advice! That would be awesome, but there are certain services that do require a physical store presence - safe deposit boxes, cash handling (beyond ATMs).

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A Finextra member 24 June, 2015, 20:21

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I agree Dinesh. But, for the future, smaller, high tech, consultative sales "stores" as branches, and not the big transaction processing branches of yesterday. Yes, one will still be able to make a deposit, and get cash, and access a safe deposit box, at the bank store / branch of the future. But, the mix of tellers (the transaction processors) in a branch to sales personnel will change in favor of sales.

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Dinesh Katyal - Financial Data Exchange - San Francisco Bay Area 24 June, 2015, 20:29

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You're correct. At least in the branches I visit, it's already happening. There's always a line for the tellers even though there are plenty of bankers in the branch sitting at their desks who are busy "selling", and a 'helpful' manager guiding people in the line to ATMs instead.