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Locating Bank Branch Becoming An Art

By Greg Bordonaro

April 09, 2012

Stand at the intersection of Trumbull and Asylum streets in downtown Hartford and you'll bear witness to a sea of bank branches.

Bank of America as well as Citizens, Webster, Sovereign, and First Niagara banks each has an office located within an earshot of each other.

Now TD Bank plans to join the crowd, with its recent decision to open a regional headquarters in Hartford 21, in what may be one of the most visible retail spots downtown has to offer.

With six banks located next door to each other, it raises an interesting question: Is downtown Hartford overbanked?

At least one industry official who has studied the downtown market says it's not. With a strong presence of professional service firms, corporations and small businesses, there is still enough business to go around, at least for now, for bank's looking to enter the market, experts say.

"If you want to be a statewide bank, you really should have a presence in the Capital City," said Michael Goman, a real estate consultant whose company Accubranch, works with banks to find new branch locations. "You are getting exposure to a great customer base in terms of law firms and other major businesses. There is a lot of value from a public relations and marketing stand point."

Goman said existing downtown Hartford branches are doing a good volume of business, but their focus is less on individual consumers and more on commercial and government banking. Even though there is decent foot traffic from people working downtown during the week, the real focus for banks downtown is to hang their shingle in front of professional service firms and corporations that demand a greater volume of business.

That is what attracted TD Bank to expand its Hartford presence and make the city one of its four regional hubs in Connecticut, said Michael LaBella, TD's Connecticut market president.

LaBella said the bank has been considering a downtown Hartford expansion for years, and is attracted to the city because it still has a strong core of insurance and professional services companies.

"The Capital City is where we want to expand," LaBella said. "Visibility wise, this is the spot we have been looking at for quite awhile."

Currently, the bank has about 10 people working in its downtown Hartford branch at 280 Trumbull St.

He said the bank will grow its downtown Hartford workforce to 40 people focused on commercial and real estate lending, cash management, trade finance, and government banking.

TD Bank has signed a 10-year lease to occupy 10,000 square feet of space on the ground and second floors of the 39-story residential-retail tower. They will open a 3,000 square foot retail branch in the glass-lined corner space fronting Trumbull and Asylum streets.

Directly above that space, on the second floor, the bank says it will occupy 6,600 square feet for its business operations.

Goman, the real estate consultant, said there is a sea change in the way banks target new branch locations, and they are taking a page out of the retail industry's playbook.

No longer is picking a branch location at random, or even basing a decision off demographic analysis, a viable business option, particularly at a time when capital remains precious.

When banks consider branch locations they must consider basic demographics as well as psychographic or socio-economic indicators that identify likely consumer behaviors, Goman said. So it's not just enough to place a branch in a high traffic area. It must be in a spot where consumers in the area also have similar lifestyle and spending habits.

Goman said the productivity of a given branch will be dramatically affected by being even 100 yards off from the ideal location. He estimates at least 10 percent of branches are opened in locations that are completely unsuitable and many of them end up having to be closed.

In downtown Hartford, the fact there a large number of branches located next to each other is actually a positive indicator because it shows there is "bank synergy." It also offers the opportunity to grow market share be stealing customers from a competitor.

"Being in the immediate vicinity of other banks is a good thing," Goman said. "If people are coming into the bank across the street, and they see your sign, they may decide for one reason or another to switch banks, particularly if they aren't satisfied with the service."

Greg Bordonaro writes the Financial Sense column every other week. Reach him at [email protected].