Why size matters
Banking is largely a distribution-based business. You need a large footprint to access more customers and offer them your banking services. Banks increase their footprints in two main ways. The first is by establishing width, or presence across a large number of states. The second is by building depth—a strong presence characterized by the number of product offerings—in just one or a few states.
Often, a bank’s footprint is a function of its size. Large banks tend to have a presence across many states. Smaller banks choose to focus on only the one state or states they are strongest in.
Online banking won’t disrupt the footprint’s importance
The increasing prevalence of online banking is a major disruption in the way banking transactions are carried out. That said, online banking is not likely to have much of an impact on the geographical footprints of banks. At least, not in the near future. The reason this is so is that relationship-building is essential to banking activities, and clearly more difficult to do online.
In its early days, Wells Fargo & Co (or Wells Fargo) (WFC) was present mainly in the west. Since then, it’s grown to become a national bank with a presence all across the U.S. As the image above shows, there are pockets where Wells Fargo is weak. But by and large it’s known everywhere in the country.
Wells Fargo occupies a position similar to its peers, which include JP Morgan Chase & Co (or JP Morgan) (JPM), Citicorp, of Citigroup Inc (C), and Bank of America Corporation (BAC). Meanwhile, Wells Fargo has the strongest presence in its legacy area, the west. Similarly, JP Morgan has the strongest presence in the east, while the Bank of America dominates in metropolitan areas.
The Wells Fargo U.S. footprint is much larger than most of the smaller banks in the exchange-traded fund (or ETF), Financial Select Sector SPDR (XLF). But to get the whole picture, we need to look at the bank’s international reach. In our next article, we’ll discuss the strength of Wells Fargo in the international arena.