What Do Urban Trends Mean for Banks?

A recent article by John Engen for American Banker manages a lot of tasks. First comes the work of citing the relevant facts regarding the trend of migration toward U.S. urban centers. To do so, Engen cites the growth of urban centers around the country between the years 2010 and 2012: “In total, 16 of the 20 largest U.S. cities experienced growth rates faster than their surrounding suburbs between 2010 and 2012, according to census data.”

Then Engen goes on to describe the implications fo the trend to the business decisions of banks—not only where and how to invest, but how to structure the bricks and mortar assets of business operations. “For banks, the budding movement of people and businesses to the cities is playing out against a backdrop of sluggish economic growth, harsher regulatory oversight, rapid technological change and earnings pressure. Cost controls are a priority, which dovetails nicely with the behavior of younger city dwellers, who generally are comfortable accessing their banks online or via mobile devices rather than visiting branches.,” writes Engen. Engen quotes a variety of executives and analysts on the subject of how urbanization might influence future practices of the banking industry. Some examples:

• “‘Whatever growth we're seeing in cities clearly matters less than it would have a decade ago, simply because of the adoption of digital channels,’ says David Stein, executive vice president and head of retail banking for Green Bay, Wisc.-based Associated Banc-Corp, which competes in Chicago, Minneapolis and Milwaukee.”
• “Clayton Baker, head of consumer financial advisory services for Ernst & Young, acknowledges the recent bump in urban populations but says he knows of no set ‘urban strategy’ for banks, no blueprint to follow for success. Banking is banking, to a certain extent. ‘There isn't just a model you can overlay on an urban market,’ he says.”
• “‘We put out a caution to our lenders two years ago: When it comes to multifamily, you've got to be very careful,’ says Joseph Hoesley, vice chairman for commercial real estate at U.S. Bancorp, which has been lending to more city projects in recent years.”