JPMorgan Chase is expanding against the trend: opening more branches in small towns in the Midwest of the United States

According to CNBC, JPMorgan Chase (JPM.US) recently announced a new goal in its multi-billion dollar branch expansion plan to cover half of the population in 48 states within "drivable" range. This requires the bank to open new branches in areas with lower population density, which goes against the common trend of banks closing branches due to higher long-term interest rates affecting the industry negatively.

Three years ago, JPMorgan Chase became the first bank to have branches in all 48 states in the U.S. Now, the company is expanding with the aim of attracting more Americans in small towns and rural areas. Jamie Dimon, Chairman and CEO of JPMorgan Chase, stated in a press release: "From promoting community development to helping small businesses, to teaching financial management skills and tools, we are working to extend the full force of the company to all the communities we serve."

Dimon's first stop is Iowa, where the bank plans to open 25 new branches by 2030. This week, he will also visit Minnesota, Nebraska, Missouri, Kansas, and Arkansas. Jennifer Roberts, CEO of JPMorgan Chase Consumer Bank, said the bank plans to open over 125 new branches in these six states. Roberts stated in an interview: "Our branch share is still low, and we know that to truly optimize our investments in these communities, we need a higher branch share." Roberts and Dimon are traveling together in the Midwest region.

Roberts mentioned that the goal is to achieve the "optimal branch share," which in some emerging markets is "more than double" the current level. At the Investor Day in May, Roberts mentioned that the company's goal is a 15% deposit share, and expanding the coverage of bank branches is a key part of this strategy. She stated that out of the company's 220 basis points deposit share growth from 2019 to 2023, 80 basis points come from branches established in less than 10 years. In other words, nearly 40% of the deposit share growth can be attributed to investing in new physical branches.

JPMorgan Chase's expansion of physical branches goes against the common trend in the banking industry of closing branches to offset some macro pressures due to higher long-term interest rates affecting the industry negatively.

According to S&P Global Market Intelligence, in the first quarter of this year, the U.S. banking industry net closed 229 branches, compared to only 59 in the previous quarter. Wells Fargo (WFC.US) and Bank of America (BAC.US) closed the most net branches, while JPMorgan Chase was the most active in opening new branches.

Based on research by KBW compiled from the Federal Deposit Insurance Corporation, the growth of branches in the U.S. banking industry peaked before the 2007 financial crisis. KBW stated that this was partly due to banks evaluating their efficiency, closing underperforming branches, and technological advancements making online banking and remote deposits possible The report states that during the epidemic, this long-term trend has intensified, with bank reports at the time indicating that even if physical branches were temporarily closed, operational capabilities remained virtually unchanged.

However, the largest bank in the United States, JPMorgan Chase, achieved a record $50 billion profit in 2023, the highest profit in the history of American banks. Therefore, while other companies choose to be more cautious, the company's investment in physical stores is in a unique position.

When it comes to the priority location of new branches, Roberts described it as a "balance of art and science." She said factors considered by the bank include population growth, the number of community small businesses, the presence of new company headquarters, new suburbs or roads under construction. Even in smaller cities, foot traffic is a key factor