They Can Afford the Space
Michael J. Panzner

Banks have often played a starring role in booms that turn to bust, with the U.S. housing bubble being a case in point. That being said, I wonder if the latest banker-inpired boondoggle described in "A Building Binge for Bank Branches" says something about the future fortunes of the industry itself?

If you’ve ever seen a new storefront rising in your neighborhood and secretly hoped for, say, a new cafe or boutique, you might know the sinking feeling when — almost invariably, it seems — the business turns out to be a bank. Now, there’s nothing wrong with banks, but, you might wonder: Don’t we have enough branches already?

Apparently not.

Across the country, prime real estate continues to be snatched up by bank companies, which are in the midst of a branch-building boom even as many of the companies merge. As of last year, there were some 94,559 federally insured branches in the United States, up from 92,394 in 2005, and 82,302 in 1996, according to the Federal Deposit Insurance Corporation.

The growth is partly a reaction to pent-up demand in this decade, when branch building slowed as bankers anticipated that their bricks-and-mortar business was giving way to the Internet, bank professionals say. But it turns out that when it comes to their money, many people still prefer the human touch.

In areas like the New York metropolitan region, building has occurred at a furious pace over the last few years, even if it is now starting to cool. It’s not uncommon to see four or more branches on a single city block or intersection. The region — with about $462 billion in consumer deposits, according to the American Bankers Association — was the seventh most active market in terms of new openings last year. (With rents having soared to $200 to $450 a square foot in prime neighborhoods, banks may be among the few possible tenants who can afford the space.)

Banks elsewhere see plenty of untapped potential. Nationwide, the number of branches grew by 2.6 percent in 2006, but total consumer deposits grew even more — by 9 percent — according to the F.D.I.C. In recent years, banks have been following the population trends in fast-growing states like Texas, which, by F.D.I.C. tallies, had 5 of the 10 most active markets last year.

But with more competitors fighting for the same markets and many of the best locations already taken, banks have had to become savvier about selecting sites for expansion. Getting it right is important: It can cost $2.5 million to $3 million to open a branch in a suburb, and up to $5 million for one in a city, according to industry experts.

James Allen, the group executive vice president for retail banking at Broadway National Bank, a $1.7 billion privately owned community bank in San Antonio, has watched as credit unions and national banks have started pouring into the greater San Antonio area, which the bank has served for more than 60 years.

“Ten years ago we could probably go out and pick a location based on gut,” Mr. Allen said. But with the new competition, he added, “the ballgame has changed.”

“It’s caused us to think and act smarter,” he said.

Hmmm....

Timing counts, too. Banks are often surprised to learn that being the first to enter an up-and-coming neighborhood may not always be wise. The second, third and even fourth entrants usually fare better, after the market is established, said Hal Hopson, global practice leader at MapInfo, which is being acquired by Pitney Bowes.

And all those banks crammed onto one corner? Competition isn’t necessarily a bad thing. In high-density markets like Manhattan, a block or two may be able to support multiple banks; there may even be a synergistic effect. Community banks, for example, often do well next to a national bank branch.

“We don’t mind being next to a large regional bank because we think we offer more on the customer service side,” said Ms. Doar of Amcore.

I can't wait to see how this ends.

Michael J. Panzner

When the stock market bubble burst in 2000, the collapse that followed wiped out over two-thirds of the value of the Nasdaq Index and decimated the hopes and dreams of millions of Americans. Now, imagine not one, but four such disasters looming on the horizon, all poised to erupt in a massive economic firestorm that will wreak widespread havoc in the months and years to come. The author identifies the most pressing financial risks we face today: First, a burgeoning tower of public and private debt wobbling precariously on a foundation of excess and fraud; second, a multi-trillion-dollar house of cards to which all Americans are exposed but few understand; third, a vast array of largely hidden government promises that will ultimately go unkept; and fourth, a retirement mirage that will leave millions enslaved to the workplace until the day they die.