America’s Biggest Bank Is Growing the Old-Fashioned Way: Branches

Hundreds of branches at rival banks are being closed each year, and customers are shunning the teller and choosing the mobile app. But at the nation’s biggest bank, old-fashioned bricks-and-mortar locations are part of the secret sauce.

The bank Tuesday is expected to announce plans to double down, continuing a yearslong strategy. JPMorgan plans to build 500 new branches in the next three years, filling out cities it has recently entered such as Boston, Philadelphia and Charlotte, N.C. For context: Only 17 banks have more than 500 branches today. JPMorgan has close to 5,000.

“It is a love affair with branches, just to be totally clear," Jennifer Piepszak, a top JPMorgan executive, told analysts last year.

It was 2018 when JPMorgan first announced that it would open hundreds of branches—a plan that was met with skepticism by analysts. After all, branches seemed passé even then.

But JPMorgan wasn’t kidding. In the six years since, it has opened more than 650 new branches and entered 25 new states. It is the first bank with branches in all 48 contiguous U.S. states. Executives say the payout has exceeded expectations.

JPMorgan now has more than $2 trillion in deposits, nearly double what it had a decade ago. In 2021, it surpassed Bank of America as the biggest total deposit holder, according to Federal Deposit Insurance Corp. data. Executives have a target of gathering 20% of the entire country’s deposits, up from 12% today, according to S&P Global Market Intelligence.

“Really every metric that we evaluate when we do investments, all of them are pointing in the right direction," Jennifer Roberts, chief executive of the Chase consumer bank, said in an interview. “All of them are indicating that our investment has been a positive choice, and we are doubling down."

JPMorgan isn’t alone. Its top consumer rival, Bank of America, has been counting on branches for its own market expansion and renovating others to defend its turf. After seeing early gains, it announced a new stage last summer. It plans to enter nine new markets and four states in the coming years, which would bring its total to 39 states. It has 11% of all deposits today and ranks in the top two deposit holders in 23 of the 30 biggest markets.

“We’re only just beginning to see the benefits of national scale," Bank of America CEO Brian Moynihan said in an interview.

Branches? Really?

JPMorgan and Bank of America aren’t looking to put a branch on every corner. While building shiny new ones, they have also been shutting plenty of storefronts, especially older locations, and combining others they deem too close to each other.

Branches have less traffic than a decade ago, and customers now do most transactions online or in mobile apps. For the total industry, thousands of branches have been closed in the past decade. Both JPMorgan and Bank of America operate fewer locations than they did six years ago.

But leaders at the big banks believe branches remain the key ingredient to drawing in new consumer and small-business clients, even in an increasingly digital world.

Most customers still use a branch at some point during the year. Even college-age kids and tech-obsessed Gen Z choose their bank based partly on whether they can get to a branch easily, the banks say. Small-business clients are core users and still bring wads of cash to branches weekly.

That said, the banks aren’t building for people to come to the teller line for simple tasks that could be done via an app. Instead, they want the branch to be a place where customers come for financial advice or to get a loan. They have turned some branches in lower-income neighborhoods into community centers, where they offer financial-literacy classes and spaces for gathering.

Aron Levine, Bank of America’s president of preferred banking, says more people than ever are now booking appointments to come to the branch.

“The primary reason for a financial center 10 years ago was transactions," he said. “Now the primary reason is for guidance."

The scientific method

The process to determine where a branch will be most profitable is as much science as the banks can figure.

Bank of America kicked off its expansion in 2014, searching for new cities where it could put down stakes. To figure out where to begin, staffers looked for overlap with its Merrill brand, which serves a wealthy bunch who typically have more than $1 million in investible assets.

Hawaii had a lot of Merrill clients, but its distance from the mainland was unworkable. Denver and Minneapolis were next on the list. A team evaluated hundreds of demographic variables and zeroed in on those that best predicted success: how many residents live nearby and household income growth, among them. A lower homeownership rate was desirable, they found, because renters were more likely to switch banks.

Executives settled on Denver. In a storefront across the street from a Hermès shop in the upscale Cherry Creek shopping district, they opened their first Colorado branch. Turnout exceeded expectations.

JPMorgan’s expansion started in Washington, D.C., in 2018. Staffers ran a block-by-block analysis of credit-card data to figure out where customers swiped and what they purchased, where they lived and their travel patterns throughout the city.

Their ideal pins kept landing on Lululemon and Starbucks. Among the first new locations: an outpost in the wealthy Northern Virginia neighborhood of Clarendon, around the corner from one of each.

In particular, the big banks want more clients who give them their direct deposits and would also use credit cards, wealth management and other products. A 2013 report from consultants at PwC found that mass-affluent customers were as much as 10 times more profitable than mass-market customers for banks.

JPMorgan’s new build-out will add a branch style aimed at winning those wealthy clients. It will rebrand many of the branches it acquired with the failed First Republic Bank as J.P. Morgan branches, not Chase. They will include more amenities, private offices and libraries and a focus on wealth management. Executives haven’t yet determined if they will serve First Republic’s famous cookies.

Trying to get the hometown feel

JPMorgan is still calibrating how many branches it needs in new markets. It has different branch designs depending on whether customers are more likely to be wealthy users who want investment and planning advice, or small businesses that need to deposit piles of cash every Friday.

The struggle for national banks entering a new geography has long been the loyalty of customers to the hometown bank, but the big guys are learning. One tactic: JPMorgan hires locals to staff up the branches.

“The local community bank feel, the big banks are getting better at it," said Peter Pollini, head of banking consulting at PwC.

JPMorgan aims to put 70% of the U.S. population within a 10-minute drive of a branch. At Bank of America, the goal is 80% of the population within a 15-minute drive.

That also means the banks have to learn new ways to capture customers at various income levels. Federal law requires banks to do business in low-income areas, and both JPMorgan and Bank of America say they are committed to having 30% of branches in those tracts.

After the 2020 murder of George Floyd created a national conversation about race, JPMorgan rethought some of its expansion, executives say. They grasped onto a branch they had opened in the heart of Harlem in 2019 as a model.

The Harlem branch was the first of what JPMorgan calls community center branches, built in minority and low-income areas. Harlem’s branch is an open space, with teller lines off to the side. Murals are painted by local artists. A pop-up space lets local entrepreneurs sell their wares. An old bank vault serves as a meeting room, with a mantelpiece that belonged to jazz legend Billie Holiday.

Since its transformation, the Harlem branch has outperformed Chase’s goals for deposit growth and customer metrics, executives say.

Three new community center openings are planned this year, bringing the total to 19.

New openings draw a crowd of Chase executives and occasionally Chief Executive Jamie Dimon, plus pledges to help communities grow.

At the opening in West Philadelphia, a phalanx of Chase employees greeted Dimon’s entrance with high-fives and cheers, a tradition known across the bank as “the tunnel of love."

“People look at JPMorgan as some large, faceless company with a CEO up in some skyscraper," Dimon told the crowd. “But this is what we get to do."

Coulter Jones and Rachel Louise Ensign contributed to this article.

Write to David Benoit at David.Benoit@wsj.com