Bank of America Corp., targeting $8 billion in expense cuts, reduced its automated teller network almost 9 percent this year by yanking most of the devices deployed at U.S. gas stations and malls.
The banks total number of ATMs fell by 1,536 in the first half, a record decline, leaving it with 16,220 as of June 30, the Charlotte-based firm said last week. Bank of America didnt renew deals to place its machines at sites owned by Simon Property Group Inc., the biggest U.S. shopping mall owner, and gas station operator Valero Energy Corp., said Anne Pace, a spokeswoman for the bank.
When they put an ATM in a mall or gas station, they have to rent that space in the same way that Sunglass Hut has to pay for their space, said Bart Narter, a senior banking analyst at consulting firm Celent. They did the math and probably concluded that these guys arent profitable.
Chief Executive Officer Brian T. Moynihan is shrinking the banks footprint to focus on his most profitable clients after regulations squeezed fees and he aborted plans to charge debit- card users $5 a month. Moynihan shuttered 108 branches this year and plans at least 30,000 job cuts in a reversal of the expansion led by his predecessor, Kenneth D. Lewis.
Its going to be a smaller platform, Moynihan said in a November conference. We have 42 million retail customers; many of those dont contribute or overcome their cost-to-serve.
Bank of America chose to pull most of its ATMs at malls and gas stations because those devices only dispensed cash and some werent available 24 hours a day, Pace said in an interview. Customers want to be able to deposit checks at an ATM, she said.
Its about convenience and access, thats what the customers are looking for, Pace said. People arent banking 9 to 5, they are banking when its convenient for them.
The move stems from Moynihans Project New BAC, an efficiency plan that targets $8 billion in annual expenses by 2015. The number of ATMs shouldnt change much more, she said.
It costs banks an average of $1,700 per month to run an ATM on someone elses property, compared with $1,100 at a branch, said Tony Hayes, a partner at consulting firm Oliver Wyman in Boston. The difference stems from rental costs and fees for armored couriers to refill machines with cash, he said.
There are very real expenses to owning and operating ATMs, and since banks dont charge their own customers to use the machine, the costs are borne entirely by surcharges paid by non-customers, Hayes said. In the current environment, banks are unable to support the cost structure they have historically.
Valero, one of the biggest U.S. refiners, also manages about 1,000 U.S. retail locations mostly in Texas, as well as in Louisiana, Arkansas, New Mexico, Colorado, Arizona, California, and Wyoming, said Bill Day, a spokesman for the San Antonio- based firm. Another 5,000 independently run sites that include other states werent covered by the banks deal, he said.
Each side has an option to renew and Bank of America chose not to renew, Day said in a telephone interview. The ones that belonged to Bank of America have been removed and in most stores theyve been replaced by other ATMs.
Simon Property had 325 retail locations across 41 states and Puerto Rico as of April, said Les Morris, a spokesman for the Indianapolis-based company. The number of mall ATMs hasnt changed, though the provider has, he said, without specifying who replaced Bank of America.
The retreat leaves Bank of Americas rivals with the chance to grab market share, Todd Maclin, head of JPMorgan & Chase & Co.s retail division, said in February. His company expanded its ATM network by more than 5 percent in the first half, to 18,132 machines. JPMorgan replaced Bank of America as the biggest U.S. lender by assets last year.
We know a lot of our competitors are underinvesting, and were talking that into account as we look at our investment opportunities like branches and ATMs, Maclin said during the February conference. But weve continued to invest and we think we have shown that it will produce growth.
Moynihan has told staff that he didnt care that JPMorgan eclipsed Bank of America in size and emphasized that his company needed to slim down after Lewis spent more than $130 billion in takeovers to gain market share in deposits, credit cards, mortgages and wealth management. In a January employee meeting he called the firm a leaner, meaner, fighting machine.