Last week I made a bold prediction
⅓ less banks in the US in 10 years.
On Monday I started the list and here are a few more types of banks will cease to exist:
Banks in the wrong place at the wrong time – Most banks are highly dependent on a defined geographic region. Farmers and Merchants Bank of Ruraltown USA made a living for the past 100 years by safekeeping farmers deposits and making land, equipment and other loans. Unfortunately, there is a shift in populations from rural to suburban and urban. Many of these banks are quickly shifting to open offices in the big city to deploy surplus deposits but this may be too little, too late. Without any competitive advantage other than a race to the bottom in pricing, they will struggle to build a business in a different geography. Same geographic trend applies for large migrations from rust-belt states to sun-belt states and coastal areas to cities in middle america. Look at how banks like Wells Fargo, US Bank, PNC, Fifth Third and others that had coastal and northern operations have migrated to the inland and southern states.
Regional banks catch the eye of larger regionals or super regionals – The super regionals are in a race to become full-fledged nationals and the larger regionals are focused on acquiring adjacent geographic coverage or synergistic product niches to broaden and deepen their reach. In this process, there will be well-operated regional banks which have scale and could continue to operate profitably on their own but instead maximize value for shareholders by taking an acquisition offer from a larger regional or super regional bank.
Any other types of banks that you think will go the way of the dinosaur in 10 years?
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Digging deep on banks is what I do. If there is a bank that you are curious about, shoot me a note and we can discuss this bank together.