JPMorgan Chase Market Branch Expansion Continues to Perform Well
Although the coronavirus pandemic has made bank branches look like a thing of the past, JPMorgan Chaseit’s (NYSE: JPM) consumer market expansion continues to progress as the bank opens new branches and collects deposits at a healthy pace.
In 2018, the bank announced a $20 billion investment that would add 400 branches in new markets over a five-year period. During JPMorgan’s recent earnings call, Chief Financial Officer Jennifer Piepszak announced that the bank had just opened its 100th branch of the expansion, with plans to open 75 more this year.
Let’s see how the market expansion is doing so far.
Image source: JPMorgan Chase.
Build quickly
Most branch expansion efforts so far targeted five major markets: Massachusetts, Pennsylvania, Virginia, Maryland and Washington, D.C. About 77 of the 100 new branches opened as of June 30 of this year were opened in those five states, according to the FDIC. In 2018, when the initiative began, JPMorgan had only one retail branch or none in all of these states.
| State | 2020 Deposits (Millions) | 2019 Deposits (Millions) | Branches 2020 | Branches 2019 | Deposits/branch (millions) |
|---|---|---|---|---|---|
| MY | $657.1 | $178.7 | 20 | 6 | $32.9 |
| PA | $399.8 | $110.8 | 19 | 3 | $21.0 |
| Virginia | $364.5 | $108.1 | 8 | 1 | $45.6 |
| MARYLAND | $326.1 | $55.1 | 14 | 2 | $23.3 |
| CC | $309.9 | $105.8 | 16 | 6 | $19.4 |
Data source: 2020 FDIC Deposit Market Share Report.
the Bank has grown its deposits at a healthy pace over the past year. In Massachusetts, one of the most banked states in the country, JPMorgan increased its deposits by nearly $500 million. In most other states, filings have at least tripled, with the exception of Washington, DC, which is on the verge of tripling.
But is it good? There are different sources that we can compare these numbers to. Guenther Hartfeil of Peak Performance Consulting Group studied all US branches in 2017 and found that a branch typically needs $25 million in deposits to break even. Additionally, he said banks typically want to double that number for a strong return on investment, meaning they want to grow a branch to $50 million in deposits. By this measure, JPMorgan is doing quite well, especially considering that many of these branches have only been open for a very short time. Virginia averaged more than $45 million per branch as of June 30, while Massachusetts averaged nearly $33 million per branch.
But according to the highlights of the FDIC’s 2019 filing summary, the average US branch had $148 million per office between June 30, 2018 and June 30, 2019. This is obviously biased by the big banks. For example, if you look at JPMorgan’s largest state market in New York, the bank had $739.1 billion in Empire State deposits and 727 branches for an average deposit size of over $1 billion. dollars. I want to point out that a number of new JPMorgan branches have probably only been open for a few months.
All the right signs
As Boris Schlossberg, managing director of FX strategy at BK Asset Management, recently told CNBC, “JPMorgan is a brand that does everything right.” The bank continues to prove this point with its retail expansion.
To be clear, I’m not saying the bank is betting on brick-and-mortar branches as the industry as a whole continues to slide. In fact, JPMorgan’s branch-wide footprint decreased by 60 between June 30, 2019 and the same period this year.
But if the biggest bank in the country really wants to be the Apple from the banking industry, as Schlossberg also said recently, it will want to have some sort of retail presence in every state. It will mostly want to be in major metropolitan areas, where it shouldn’t be difficult for the bank to leverage its brand and resources to compete with other banks on deposits and other lines of business. Currently, the bank has a presence in 38 states plus Washington DC, and in many of these states it is further expanding its presence. If early signs are any indication, then JPMorgan can certainly continue to significantly increase filings and market share.
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