Bank spokesman Jim Mahoney said the proposed closings are related to customers' continued migration to online and mobile banking. Regulators did not pressure the Charlotte bank to close branches, he said.
The idea of eliminating some of its 6,100-some branches came up at a meeting last Thursday at the bank's corporate headquarters, where chief executive Ken Lewis met with some institutional investors, Mahoney said. The discussion turned to how the rise in online banking might affect the bank's brick-and-mortar branches, Mahoney said.
"A question was asked of Ken Lewis as to what the magnitude (of the branch closings) could be and he said he didn't know," Mahoney said. "And they said, 'Could it possibly be in the 10 percent range?' And he said, 'Conceivably.'"
The Wall Street Journal reported in Tuesday's paper that Lewis said at the meeting that he planned to shrink the branch network by about 10 percent.
Mahoney said the bank is constantly closing and opening branches as it evaluates their profitability. He said that any plans are only very preliminary and that the closings would be spread out over the next three to five years.
"We do not have a plan to close a specific number of branches, we have not identified branches to close, and we are not in the process of identifying branches to close," Mahoney said.
Analysts said they weren't surprised by the impending branch closings, though their reasons varied. Some indicated they agree with the reason the bank put forth, about changing consumer preferences.
Bank of America has about 29 million active online accounts, up 15 percent from a year ago, according to its latest earnings report. And almost 50 percent of its deposits are now made at ATMs, up from about 33 percent in 2006, when it introduced ATMs that print an image of the check, Mahoney said.
But Dick Bove, an analyst at Rochdale Securities, said Bank of America's talk about changing customer taste is "laughable."
Rather, he said, the bank is reacting to the dismal economy and to the threat of increased regulation. It is closing branches because serving customers electronically is a lot cheaper than serving them at a branch. It is also trying to get ahead of any regulations that could come from the Obama administration's proposed new regulatory agency.
"If this Consumer Financial Protection Agency is created, it will -- I guarantee you -- tell you that you cannot close branches in minority areas, you cannot close branches in areas that are now low-income," Bove said. "So if you do not want to fight that fight with the government over every branch you want to close, you better get them closed before that agency goes into effect."
Others said that trimming branches has always been an effective and smart way to save money, since employees are one of the biggest expenses for a bank.
"With any big bank that's assembled literally thousands of branches over the years, there's a cycle you go through every 10 years or so, where you prune five or 10 percent," said Ken Thomas, a Miami banking consultant and economist.
In the savings and loan crisis of the 1980s and 1990s, it was normal for banks to cut 5 or 10 percent of their branches, Thomas added.
Struggling
Virginia-based banking consultant Bert Ely said Bank of America would probably be wise to pull out of any markets where its branches are underperforming.
