Big banks PNC and Key announced during Tuesday's virtual Global Financial Services Conference hosted by Barclays Capital that they are cutting back on branch locations through 2021.
PNC Chairman and CEO William Demchak said that his bank is on track to close 280 branches by 2021. Roughly 160 branches will close by the end of this year while another 120 are slated to close next year.
“You will see us continue to thin out our network,” Demchak said. “For that to work, your digital sales have to pick up at a pace that offsets the sales you would get at the branches you are closing. So far, that is happening and then some.”
According to PNC's latest quarterly filing with the Securities and Exchange Commission, the bank has 2,256 branches.
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PNC has opened at least 13 quasi-digital "solutions centers," currently located in Dallas, Houston, Kansas City, Mo., and Nashville, Tenn., which offer an alternative to the traditional branch but still give customers the opportunity to consult with the bank's staff and access mobile workstations, ATMs and banking kiosks. According to Demchak, the bank plans to open 12 more solution center locations by the end of this year and an additional 25 in 2021.
Demchak noted that checking account openings at PNC's average solution center was double the amount of a typical de novo branch before COVID-19. However, the pandemic has caused solution center sales to decline, falling more in line with what a branch's normal rate would be. Demchak added, however, that those sales have recently started to rebound.
“What COVID has done for us is it has showed us where to prioritize investments,” Demchak added.
Meanwhile, Key chairman and CEO Chris Gorman, said during the same conference that the coronavirus pandemic has accelerated the $171 billion-asset company's digital transformation by as many as five years.
He said the company has been adding more digitally sourced deposits and has been gaining more business outside of its offices during the pandemic, which are trends that "have implications for what goes on in the branches.”
While Key has only closed an additional 21 branches this year after shuttering 61 branch locations in 2019, Gorman said the ongoing shift to digital due to the pandemic is providing an “opportunity to continue to ramp up." While he did not disclose how many branches could close, he noted the objective for the company is a smaller "more impactful" footprint.
Key Bank, which currently has 1,077 branches, said in its latest quarterly filing with the Securities and Exchange Commission that it spent $147 million on occupancy in the first half of 2020, a 1.4% increase from a year earlier. Gorman said Tuesday that any savings in that area can be reinvested in technology to create a better customer experience.
As for bank acquisitions, Gorman expects Key to remain on the sidelines for the foreseeable future.
“I think the jury is really out on M&A in general and mergers of equals, in particular,” Gorman said.
Key hasn't made a bank acquisition since its $4.1 billion merger with First Niagara Financial in June 2016.
"I will tell you this, from spearheading our integration of First Niagara, I know that there's a real opportunity cost ... to buying whole banks," he added. “The best opportunity for us is to continue to implement our organic growth strategy."
Gorman believes there may be opportunities to buy a “niche entrepreneurial company” similar to Key’s April 2019 purchase of digital lender Laurel Road. Since the deal closed, Laurel Road, which focuses on lending to health care professionals, has originated $3 billion in loans, Gorman said.