Why JPMorgan Chase Is Closing 300 Branches

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JPMorgan Chase & Co. JPM, one of the nation's largest banks, plans to close 300 branches over the next two years, equating to just over 5 percent of its 5,720 locations in the U.S. The move is part of the bank's plan to cut costs, which — along with other measures — will save JPMorgan Chase $1.4 billion. The bank announced this move Tuesday during its annual investors conference, reports CBS News.

By number of branch locations, Chase Bank is second only to Wells Fargo, which has over 6,300 U.S. branches as reported by the FDIC. These branch closures are also a reversal of the bank's moves in recent years, as it added 134 branches from 2012 to 2013, reports The Wall Street Journal.

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Teller Deposits Cost JPMorgan Chase 21 Times as Much as Mobile Deposits

JPMorgan Chase's move to cut 300 branches is a response to bank customers' growing reliance on online and mobile banking over branch services. For example, while Chase Bank tellers handled 90 percent of deposits in 2007, in 2014 they only processed 42 percent of the bank's deposits. Direct deposit, ATM deposit and mobile deposit have become popular alternatives to in-person transactions with a teller, and banks also prefer them as they are much more cost-effective.

JPMorgan Chase estimates that a teller-processed deposit costs the bank 65 cents each, while a mobile deposit made with a smartphone costs just 3 cents; this makes teller deposits over 21 times more expensive than mobile deposits, reports CBS News. Deposits at an ATM cost about an eighth of those processed by a person.

Even with 300 fewer bank branches, JPMorgan Chase customers can still expect to have access to a location near them. The bank will still operate roughly 5,400 branches, well above the number offered by most domestic banks. The bank also indicated that it plans to continue expanding its mobile banking services and invest in more sophisticated ATM technology, reports the Wall Street Journal.

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JPMorgan Chase to Expand Private Client Services

A move away from retail branches might allow JPMorgan to gear locations toward serving private clients with wealth management and investing services. While deposits and other transactional services are becoming less of a focus for bank branches, "Advice has not migrated" away from in-person service, said Barry Sommers, JPMorgan consumer bank chief executive, according to The Wall Street Journal.

JPMorgan Chase plans to add more private offices to its branches and hire more Chase Private Client bankers to provide financial advice to wealthy customers. In fact, Sommers said that with this strategy the bank could actually gain market share, even as it closes locations.

Photo credit: longislandwins

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