JP Morgan Is Quietly Moving Bank Branches Out Of Lower Income Areas

Some of the biggest banks in the United States are quietly closing branches in low income areas, and nobody more so than the people's JP Morgan.

As one example, JP Morgan is shutting it outlet in Aberdeen, Washington, where it has just one branch. And now that the bank is going to be leaving the town, the closest Chase branch is going to be 40 miles away. This is part of a broader move that banks are making, as they shift their attention in the age of online banking to wealthier areas, according to a new Bloomberg article.

As this branch closes, JP Morgan is planning on opening 70 branches in the vicinity of Washington DC. Places like McLean Virginia, the 25th richest town in the US, will be getting a branch. This comes amidst a larger move from banks to shrink their vast branch networks, cutting back in "relatively poor neighborhoods". As online banking spreads, major banks have still claimed that serving all of their customers at branch locations is important, regardless of income - a requirement of the Community Reinvestment Act.

But consumer advocates warn that these closings leave many low income areas with less competition for services. A 2014 study by an MIT economist concluded that branch closures in low income neighborhoods make it harder for local businesses to get loans.  Scott Astrada, a policy advocate at the Center for Responsible Lending, told Bloomberg: "Bank branches are a crucial part of financial access. The argument that we all live in this digital society so we don’t need bank branches is completely false."

JP Morgan is a great example of this shift. The bank announced plans a year ago to to open 400 branches and boost lending across the nation. In the 13 months leading up to January, the bank opened 185 new branches, with 71% of them in affluent areas. At the same time, it has given notice of its intention to shut down 187 branches, with about half of those in neighborhoods where the household income is below the national median of $60,336.

Anne Pace, spokeswoman for JP Morgan said: “In our footprint, Chase has significantly more branches and more deposits in low- to moderate-income neighborhoods than any other competitor. Even when we’ve consolidated branches, we continue to grow market share in those neighborhoods. In the vast majority of cases, the next closest branch is less than two miles away.’’

JP Morgan is part of a larger trend of consumer banks shutting down branches. More than 1900 branches have closed in lower income neighborhoods in the four years prior to 2018. JP Morgan, Wells Fargo and Bank of America are all leading the charge, but Federal Deposit Insurance Corporation data shows that JP Morgan has consistently had a smaller proportion of branches in lower and moderate income areas. 

Wells Fargo, on the other hand, got a better report card. They serve “significantly more markets than any other national bank peers, including in underserved communities,” according to a company spokeswoman. A third of Bank of America's branches are in low and moderate income areas and "that has been consistent over a number of years," according to the bank. 

At least Jamie Dimon didn't beat around the bush when he recently said at a February investor conference that the biggest opportunity for the company was its wealthy customers. The bank has reportedly captured only 1% of the market that caters to customers with at least $250,000 in assets. 

"It’s not that hard to say, ‘Why not 10 percent?’” Dimon said.