Lisa Simpson
Aug 27,2009
In: Finance

Economy Is Responsible for the Closure of Bank of America Branches

bank-of-america

Banking analyst Richard Bove says economy is responsible for the closure of 600 branches of Bank of America. The banks are not viable anymore and hence they will be closed. Bove says that Bank of America will close the branches as they are running at a loss. According to a report, the bank may shut down 10 per cent of the branches very soon. It is, however, not known which branches are to be closed down.

In a recent report, Bank of America said that it has shut down 259 ATM machines and also closed 30 bank branches since last year. The bank had 18,426 ATMs on the national scale till June 30. In December 2008, the number of ATMs was much higher at 18,685. The number of banking centers had also plummeted. While in December, the number of centers was 6,139, in June this year the number went down to 6,109.

The closing down of banking centers and ATMs made one thing clear. The Bank of America, which had once sworn by acquisitions, is now no longer on the expansion mode. It has bucked the trend of acquisitions.

Reports indicate that consumer preference has now shifted to electronically operated services. Hence, Bank of America branches were compelled to close down because its branches are not electronically operated. Bove pointed out in an analysis that the bank had developed a strategy by which it closed branches in the last decade. The bank soon underwent a course correction and opened branches early this decade. The branches became profitable soon.

Bove also observes that the crash in the real estate market is largely responsible for this. In order to stay ahead of competition, banks had set up offices in plush areas but when the real estate growth slowed down, there was no other option for the branches but to move out.

Bove said there is a need to put new proposals in place for regulation of the banking industry. There is a need for an agency that can tell the banks to keep loss making branches open also.

It is very strange that the bank which had once been designated as the biggest in the Tampa Bay Area is now suffering such a fate. According to a report by the Federal Deposit Insurance Co, it once had 158 offices. Its deposits were to the tune of $15.3 billion. It also enjoyed a market share of 20 percent till June.