Branch Pruning

Cost cutting hits local banks

Every Main Street, U.S.A., needs a few vital businesses: a grocery store, a pharmacy, a barber shop and a bank. So when the Bank of America decided to close its branch in Piru, Calif, (pop. 1,284), the residents felt stranded. They would now be forced to drive eight miles on a winding road to Fillmore (pop. 9,602) to do their banking. "We didn't realize that people would get as excited as they did," said Thomas Beeler, the bank's area manager, after facing 100 shouting citizens at a Piru town meeting.

Piru's plaint is one heard increasingly often as large banks prune their sprawling networks of branches in order to reduce expenses. This year San Francisco's Wells Fargo Bank may close up to 29 of its 387 offices. New York City's Chase Manhattan Bank, which once had 220 branches, now has but 182.

In the days when banks were not permitted to offer a higher rate of interest than that set by the Federal Government, the financial institutions competed on the basis of customer convenience. Branches sprouted like hamburger stands as banks ventured into out-of-the-way places. Says Steven Rautenberg, a vice president with Chase Manhattan: "Since we couldn't offer market value on savings, we needed a branch on almost every corner to attract business." The total number of branches of banks in the U.S. increased from 21,880 in 1970 to 43,995 in 1981, the peak year.

But since 1980 looser federal rules have permitted banks to pay higher interest rates, and rising costs have forced bankers to watch expenses more carefully. Building a branch bank can cost more than $1 million, compared with about $350,000 for the automated-teller centers that banks have been installing at former branch locations and in shopping malls and airports. The machines also cost less to operate, about 250 per transaction vs. 500 with a human teller.

Meanwhile, back in Piru, Calif., the unhappy residents have won a reprieve. The Bank of America has agreed to postpone closing the branch until Dec. 31. During that time, local citizens hope to lure a new bank to town. This file is automatically generated by a robot program, so viewer discretion is required.