Improving Branch Network Location Effectiveness

The role of bank branches is changing. Where once, branches were major transactional channels, they are now points of interaction. In this report, we share how our advanced data analytics reveals opportunities for major US banks to recalibrate their bank branch networks.

We analyzed existing branch locations of 8 national banks: Citibank, Chase Bank, Bank of America, US Bank, Wells Fargo, TD Bank, Capital One and Fifth Third Bank in major cities such as Chicago, New York, Dallas, Los Angeles, San Francisco, and Boston.

To evaluate their branch location strategies, we collected data on the market shares of these banks in respective cities. We also obtained branch location information for each of these cities from the Federal Deposit Insurance Corporation’s (FDIC) Summary of Deposits (SOD) database. Finally, we collected data on demographic variables such as neighborhood information, number of households, and mean income per household for all cities studied.

Using the market share data and a p-median model, we generated the ideal number of branches and branch locations that a bank should have in a particular city. Then we compared our proposed network with the existing branch network.

Our findings suggest that some of the banks need drastic changes in their branch locations. For example, Citibank in San Francisco has scope to increase the number of branches by 30%, while TD Bank is overrepresented in New York and would profit by reducing its branches by 33%.