Wells Fargo Deal Will Cut Crocker Branches
Wells Fargo Bank’s proposed purchase of Crocker National Bank will accelerate the shrinkage in the number of bank branches across California, a trend that has been under way for four years since the explosive growth in branch construction in the 1970s.
The merger, announced Friday by Wells Fargo and Crocker’s British parent, Midland Bank, will combine the two banks’ large branch systems into a single statewide financial giant. But Wells Fargo executives already have begun a search for overlapping branches to close.
California’s five biggest banks embarked on programs of branch closings--the polite term is “consolidations”--in 1982 as deregulation of interest rates and intense competition combined in an inexorable profit squeeze.
Since then, 369 branches have been shuttered by the “Big Five” California banks--Bank of America, Security Pacific National Bank, Wells Fargo Bank, First Interstate of California and Crocker National Bank.
Wells Fargo has been the most aggressive in its branch-closing program, eliminating nearly 25% of the 397 offices it operated at the beginning of 1982. Today, the bank has 307 branches. It has reduced employment from a high of 18,559 at the end to 1981 to 14,619 today.
Not only has the total number of offices of California banks shrunk, but the services available at each are now more limited. Full-service branches have been replaced by specialized business lending centers and limited-service consumer offices. Thousands of tellers have been replaced by electronic teller machines to handle routine transactions.
The banks learned that their previous strategy of offering all services to all customers in all branches was inefficient and extremely costly.
These lessons likely will guide Wells Fargo as it struggles to incorporate Crocker’s high-cost 319-branch network into its own system. Wells Fargo Chairman Carl E. Reichardt told the banks’ employees Friday that the success of the merger will depend on the elimination of duplication in services, staff and facilities.
The majority of the closings are likely to be in Northern California, where Wells Fargo and Crocker have long histories and extensive branch networks, bank analysts said. Nearly 400 of the combined banks’ 626 branches are in the northern half of the state.
Employees Advised
Crocker Chairman Frank V. Cahouet, in a letter to his bank’s staff, offered these less-than-reassuring words to central office workers and employees of the doomed branches: “For those whose jobs will not last under a change in ownership, please remember that Wells Fargo offers a package which gives displaced employees and their families comprehensive benefits.”
The merger of the two banks reflects another change sweeping through American banking, bankers and bank analysts noted. Banks such as Wells Fargo and Crocker that do not dominate their markets are finding themselves caught between larger, acquisition-minded competitors and smaller “niche” or “boutique” banks. “Getting caught in the middle is getting caught in no-man’s land,” said Sal Serrantino, president of California Research Corp., a financial consulting firm. “They’re not big enough to get full economies of scale but too big to provide a personalized level of service and marketing niche operation. They either have to get bigger or get smaller. The only other option is to get acquired.”
A number of analysts suggested that Wells Fargo’s bold and unexpected move might have been prompted in part by concern that Wells Fargo itself might be a takeover target.
Indeed, there were rumors in banking circles just a few months ago that First Interstate Bancorp would take a run at Wells Fargo. The rumors were denied by both companies and the deal, if it was ever contemplated, obviously never came off.
CUTTING BACK BRANCHES
At peak Now B of A in 1982 1,092 903 Security Pacific in ’83 627 600 Wells Fargo in ’84 332 320 First Interstate of Calif. in ’82 397 307 Crocker in ’82 370 319
