Are 5,000 JPMorgan Branches Too Many?

Banking, finance, and taxes

Published: September 26, 2024 7:10 am

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Does JPMorgan Chase & Co. (NYSE: JPM) need to operate thousands of bank branches?
AI-driven locations and more online banking options can and probably will replace the traditional bank branch business.
Also: Dividend legends to hold forever.

JPMorgan Chase & Co. (NYSE: JPM) has 5,100 branches in the United States, which ranks it first among all banks by that measure. Wells Fargo has just over 4,300, and Bank of America has around 4,000. AI-driven locations and more online banking options can and probably will replace the traditional bank branch business.

There are many estimates about what it costs to open and maintain a bank branch. For instance, in urban areas, the opening cost can be well over $1 million. Depending on personnel, operating costs can be nearly as much on an annual basis. In expensive cities, location rent costs can be well into the six figures.

So far, bank branch closings have been modest. S&P Global markets report, “Between Bank of America, Chase, US Bank, Capital One, PNC Bank, Wells Fargo and TD Bank, another 400-plus have already closed in 2024.” Yet, no single national bank has decided to shutter a large number of branches at the same time.

Artificial intelligence may be the key to the future of the bank branch business. Even if physical locations remain open, many experts believe they will not need to be run by people. Advanced AI-driven hardware will be able to perform the tasks of tellers and, eventually, low-level lending officers.

For years, online banking has been among the best ways for banks to control retail costs. Every retail bank operation, from check deposits to home loans, can be done online. The only major thing an online banking service cannot do is deposit or dispense cash. However, many people do that at ATMs.

JPMorgan has to support over 5,000 branches. So, management must consider whether these are worth the cost and the impact they may have on profits.

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