A brick-and-mortar bank battle is brewing in Charlotte, North Carolina, and the nation’s banking giants are ready to duke it out.
Thanks to a history of friendly regulations and a hunger for credit during industrialization in the South, Charlotte is currently the second biggest banking town in the U.S. Today, the Queen City is an attractive alternative for talented bankers and has rapidly expanded its population to around 870,000, about double the size of Atlanta and about 10 times smaller than the No. 1 city for banking, New York City.
Charlotte has already been the home of Bank of America (BAC) and a regional hub for Wells Fargo (WFC), but will soon also become the prized target of JPMorgan Chase (JPM) and U.S. Bank (USB), rival megabanks looking to open branches in the city for the first time. And familiar faces in town, SunTrust (STI) and BB&T (BBT), are in the process of a merger that will create a new banking giant in the South with a new name: Truist, which will plant its flag in Charlotte with a new headquarters.
Branches are becoming less popular as customers increasingly turn to mobile banking. An S&P Global Market Intelligence analysis showed that 1,947 U.S. bank branches shuttered in 2018, almost double the amount of branches that closed six years earlier, in 2012.
But the bank branch brawl in Charlotte highlights a new strategy at the big banks: aggressively opening new branches at volumes that smaller banks could not compete with in order to build brand recognition and take market share from the other big banks across the street.
As bank consolidation leads to the same big players across all corners of the U.S., the fight in Charlotte could be telling for the future of big bank competition in the whole country.
Jockeying for the crown in the ‘Queen City’
Bank of America is by far the tallest of the giants in Charlotte. At 871 feet, Bank of America’s headquarters literally towers over the city, and edges out the second-tallest building, the Duke Energy Tower (which Wells Fargo actually owns), by 85 feet.
In terms of bank metrics, Bank of America’s lead on Wells Fargo is magnitudes larger. The most recent data from the Federal Deposit Insurance Corporation - which includes retail, non-retail, and commercial balances - shows that 79.73% of Charlotte’s $199.1 billion in deposits are held in Bank of America accounts, an impressive lead over second-place Wells Fargo, with 14.3% of deposit market share.
But Bank of America and Wells Fargo are about to face competition from the largest bank in the U.S. with the entry of Chase Bank. Its parent company, JPMorgan Chase, announced in March that it would be using its massive war chest to open up 90 branches in new U.S. markets, including Charlotte. And in April, the fifth largest bank, U.S. Bank, followed up by announcing it too would be moving into Charlotte with 10 branches to be opened by the end of 2020.
For both JPMorgan Chase and U.S. Bank, their digital customers pulled them to Charlotte.
A Chase spokesperson told Yahoo Finance that the company already has over 300,000 consumer customers and 8,000 business banking customers in the Charlotte area — without a single branch in the city.
U.S. Bank also told Yahoo Finance that the company already has thousands of customers in Charlotte, and hopes to use its soon-to-be physical presence to provide more services.
“We’re following them,” said U.S. Bank vice chairman of consumer banking Tim Welsh.
BB&T and SunTrust, which rank third and sixth in market share in Charlotte, will soon become a huge player in the city as they continue to work through their blockbuster merger to become the sixth-largest bank in the U.S. The combined company, which has yet to be named, will be not only move its headquarters to Charlotte — it will also build a hangar at Charlotte Douglas International Airport for corporate aircraft, BB&T confirmed to Yahoo Finance.
Truist could become the largest bank in Charlotte by branch count; FDIC data as of June 30 showed a total of 100 BB&T and SunTrust branches in the metropolitan area, although the company could consolidate a number of locations. Wells Fargo has 86 branches in Charlotte, while Bank of America has 61.
Banks aren’t only facing more competitors, they are facing more competition, thanks to the Federal Reserve’s four rate hikes in 2018.
As the Fed raises short-term interest rates, banks are pushed to hike the amount they pay on customer deposits. Depending on their sensitivity to interest rates, some banks may be quicker than others to reprice their deposits.
On busy intersections like Sardis and Monroe on the southeastern edge of the city, that means customers may not hesitate to move their money from one to any of the four rival banks across the street, offering the highest interest rate.
“Our clients are seeking better returns because there are better returns available out there,” BB&T regional president Wes Beckner told Yahoo Finance, adding that in order to compete, the company needs to “stay close” to its clients.
The bigger picture
In 30 out of the country’s 50 states, the top bank by deposit share is either Bank of America, JPMorgan Chase, Wells Fargo, or U.S. Bank. Rewind to 1998, when the top four banks (also using FDIC summary of deposits data) — NationsBank, Norwest Bank, U.S. Bank, and Bank of America — commanded only 18 states.
The story of consolidation, which continues with BB&T and SunTrust’s transformation into Truist, began even earlier than 1998.
In the 1980s, North Carolina and other Southern states joined in a “compact” to only allow interstate mergers of banking companies within the region.
The initiative, which was meant to give southern banks the scale to compete against larger banks outside of the south, allowed what was then North Carolina National Bank (NCNB) — based in Charlotte — to take off on an M&A spree. As the company grew, NCNB became NationsBank, and then BankAmerica, and then its current iteration: Bank of America.
“You do have 30 to 40 years of activity. And it would have been greater had the recession not hit so hard — it probably would be bigger than it is,” Charles Bowman, Bank of America’s market president for Charlotte, told Yahoo Finance.
Wells Fargo similarly gained scale after its 2008 acquisition of Wachovia, the other North Carolina bank that raced with NCNB during the wave of Southern consolidation.
The history of consolidation makes it no surprise that Bank of America and Wells Fargo hold 94% of all deposits in Charlotte. But that level of concentration is unusually high, considering that the top two banks in the nation’s banking capital of New York (JPMorgan Chase and Bank of America) control only 39.1% of the metro area’s deposits, as of 2018 data.
Even in a comparable Southern city like Atlanta, the top two banks — SunTrust and Bank of America — control a total of only 45.9% of deposits in the metro area.
U.S. Bank’s Tim Welsh told Yahoo Finance that there are “very few cities” as concentrated as Charlotte, hoping that they can wrangle some market share from the top.
Those who have called Charlotte home are ready to fight back. Bank of America is planning to refresh and move some of its branches in the city, ultimately growing its branch network from 57 locations to 62 over the next three years.
At Wells Fargo, region bank president Kendall Alley told Yahoo Finance that the company is used to the competition and is focused for the time being on continuing to grow deposits.
“We will continue to defend our turf,” Alley said.
Note: This story was edited at on June 14 to add details on the FDIC’s methodology for deposits in addition to branch counts in the city of Charlotte.
Brian Cheung is a reporter covering the banking industry and the intersection of finance and policy for Yahoo Finance. You can follow him on Twitter @bcheungz.