Cutting branches, shifting departments and adapting to customers moving to mobile banking seems to be the main themes for major banks in 2015.
And remarks from Bank of America’s CEO Brian Moynihan during the company’s second-quarter earnings call showed once again that customer preference toward more self-service and online options is driving the decisions behind the bank’s mobile strategy.
Its quarterly stats show why. Bank of America’s mobile banking customers grew to 17.6 million users in the quarter, a growth of more than half a million users, compared to Q1’s figures which tallied just under 17 million users. It’s more than a 2 million user growth from Q2 of 2014. As seen in Q1, mobile accounts for 13 percent of all deposit transactions. That’s up from the 10 percent seen in 2014’s Q2. But more customers going online and turning toward mobile meant one thing for its physical footprint: cutbacks.
In its quarterly earnings release, BoA noted that the growth of mobile banking and self-service customer touchpoints has impacted the bank’s retail footprint. This means closing 267 locations, and opening 33 locations. By the end of Q2, Bank of America had a total of 4,789 financial centers. Q1 ended with 4,835 branches, which was down from last year’s Q1 with 5,023 branches.
“We’re moving because the customers are moving in how they conduct business. So you’ve got to run your changes consistent with what they are doing. That’s a baseline — that’s what you have to stick to. Because if you forget that you can overshoot or undershoot, frankly,” Moynihan said during the call with analysts.
While there have been cutbacks of some employees as banks shift more toward digital services, BoA has also hired what Moynihan called “customer-facing” employees.
Besides mobile growth, online banking has also grown to 31 million users. What’s interesting about Bank of America’s digital evolution is that its growth was flat for some time before recently picking back up, Moynihan said. He notes that 16 percent of all sales made on Bank of America’s cards are now digital.
Mobile banking has also helped to increase efficiency in its retail banks. A year ago, the bank was seeing about 2,000 appointments scheduled a week at a physical branch. A year later, Q2’s figures show that the number has grown fivefold to 10,000 appointments a week made from a mobile device. Providing customers with the ability to quickly schedule via a mobile device has helped create a more efficient branch structure since they can better predict how to staff specific branches, Moynihan said.
“Customer scores have gone up overall. Mobile channels have gone up 1,000 basis points in customer satisfaction,” he said.
He also emphasized that BoA has been diligently working to balance how to manage its physical branches with online services, and recognized that clients may become upset if too many branches are shut down.
“We’ll do this the right way because if you push too hard you’ll upset the clients,” he added.
Outside of online and mobile banking, Bank of America also saw a strong quarterly increase in how many credit cards were issued. The bank issued 1.3 million new consumer credit cards in Q2, which was up from 2014’s Q2 1.1 million. The figure was also the highest number since the third quarter of 2008, according to BoA’s earnings release. Consumer banking deposits were up $33 billion, or 6 percent, from the year prior at $547 billion.
In terms of total earnings figures, Bank of America reported a net income of $5.3 billion, which was significantly up from 2014’s Q2 figures of $2.3 billion. Revenue also rose $385 million (2 percent) from $22.3 billion the year prior. Consumer banking saw a net income increase of 4 percent from 2014’s Q2 to $1.7 billion.
“Solid core loan growth, higher mortgage originations and the lowest expenses since 2008 contributed to our strongest earnings in several years, as we continued to build broader and deeper relationships with our customers and clients,” Moynihan said in the prepared earnings release. “We also benefited from the improvement in the U.S. economy, where we are particularly well-positioned.”