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Why Is JPMorgan Chase Building Branches While Other Banks Are Closing Them?

The net result is that fewer and fewer transactions are being conducted in bank branches. FMSI, a consulting firm that tracks the performance of bank branches, estimates that transaction volumes at credit unions and community banks have fallen by 45% since 1992. Meanwhile, the hourly pay rate of branch employees has increased by 90% over the same period. This means that the cost of each in-branch transaction has risen by 133.3% in just over two decades.

Bank of America and others have responded by reducing their branch counts. But JPMorgan Chase seems intent on going against the crowd. Speaking at the Barclays Global Financial Services Conference, Dimon shared the bank's strategy to grow in markets where JPMorgan Chase doesn't have a presence:

We [will] grow intelligently in cities that we don't have a footprint, like Nashville. And so you're going to see us be more aggressive. And you are going to see us enter new markets with consumers. We've never done it before; go to a new city and open 100 branches over it, it may take 2 years or 3 years, something like that. And so we're going to be trying things to grow organically.

Beyond the fact that this goes against the prevailing winds in the bank industry, Dimon's strategy to build branches, as opposed to buying them from competitors, which is a much cheaper way to acquire a physical footprint in a city, evidences a new reality facing the nation's three biggest traditional banks, JPMorgan, Bank of America, and Wells Fargo . Because these three banks each control more than 10% of the nation's deposits, they're prohibited from growing through acquisition by the Riegle-Neal Act of 1994 -- which gave nationally chartered banks the power to branch across interstate lines for the first time since 1927.

The point here is that branches still matter. "Market share in [a particular] area is really important," said Dimon, referring to the need to have a physical presence in major metropolitan centers. "Convenience is [also] still really important," he went on. Consequently, while building branches may not be the most economical way to gain market share by offering convenient places for new customers to open deposit accounts, it's better than doing nothing at all.

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The article Why Is JPMorgan Chase Building Branches While Other Banks Are Closing Them? originally appeared on Fool.com.

John Maxfield has no position in any stocks mentioned. The Motley Fool owns and recommends Wells Fargo. The Motley Fool recommends Bank of America. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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