Big bank profits highlight digital shift

The profits of the big banks have shown that the great digital shift of financial services continues.

JP Morgan, Bank of America, Citi and Wells offered variations on several themes last week: A mild recession looks like a real possibility this year. The specter of credit losses calls for prudence and a boost in loan loss provisions, despite some resilience in consumer spending.

And the lists of customers who bank online continue to grow. Those same customers are actively engaged digitally, turning to electronic checks, P2P payments, and online financial assistants.

The number of branches has also been reduced or, at best, almost flat, which helps support the fact that the fundamental shift to do more, online and on all devices means less urgency for build expensive physical footprints.

Some statistics stand out.

Bank of America said in its earnings and commentary presentation that digital “sales” made through the company’s online channels increased 22% year-over-year and now account for 49% of that activity. Active mobile banking users increased more than 7% year-over-year, to 35.5 million people.

“Verified digital users grew to 56 million with 73% of our consumer households fully digitally active,” CEO Brian Moynihan noted on the call. “We’ve had over a billion logins to our digital platforms every month, and that’s been going on for some time.”

He also added that there were 146 million interactions with Erica, Bank of America’s virtual financial assistant, in the most recent quarter, up from 123 million a year ago, or 18.7%. Erica’s users were 33.5 million in the fourth quarter, up from 24.6 million last year.

A snapshot of consumer-level activity can be seen as Zelle’s 178 million “sent” transactions topped the 115 million checks sent in the quarter by a wide margin.

Management also noted on the call that the digital shift has also benefited the bank’s operating structure: Bank of America served those customers with 387 fewer financial centers or branches than it had seen since before the pandemic. The number of bank financial centers stood at just over 3,900 at the end of last year, up from more than 4,170 a year ago.

JP Morgan’s active mobile customers increased 9% to 49.7 million consumers. Branch counts were down about three from a year ago to 4,787 recently.

Streamlining brick and mortar operations

“We continue to focus on branch rationalization as digital adoption and usage among our customers has steadily increased,” Mike Santomassimo, Wells Fargo’s chief financial officer, said during last week’s conference call.

The number of company bank branches was 3.7% lower than a year ago, at 4,598. Wells reported that it had 28.3 million active mobile customers, up 4% from the previous year, and mobile logins stood at 6.6 billion.

Management highlighted the appeal of Vantage, the recently announced digital banking platform that uses artificial intelligence and machine learning to provide what is billed as a “tailor-made” set of recommendations and information for customers. Santomassimo said the bank will continue to move more applications to the cloud and consolidate data centers this year.

Citi’s active digital users increased 6% to 25 million; its active mobile users outpaced that growth by 10% to 18 million, as the number of branches dropped by a percentage. Filings showed digital deposits (end of period) up 21% to $24 billion. Chief Executive Officer Jane Fraser noted on the call that 80% of the bank’s customers have been engaging digitally. Technology spending at the bank increased 13% year-over-year, according to management.

The unstoppable digital shift will cement the place of banks in the connected economy, well beyond transactions and account creation. As PYMNTS research showed late last year, more than half of consumers trust banks to provide super apps – digital gateways that serve as gateways to a myriad of financial and non-financial channels. The more they use mobile and digital banking offerings, the more trust you build.