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This Week in Retail Banking | May 30, 2020

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Despite continued reopening around the country, the prolonged COVID-related disruption and mounting retail bankruptcies are creating much uncertainty about how quickly banks should resume more normal branch operations.

To that end, Novantas analyzed SalesScape benchmarking to understand how much disruption truly occurred, as well as the impact on sales and service volumes in the branch. The upshot: massive declines in work-center branch volumes may be just the tip of the iceberg as retailers remain under tremendous pressure and Americans continue to work from home.


Consumers are slowly emerging from their stay-at-home orders and are starting the transition back to normalcy. Every U.S. market has experienced an increase in retail visitation over the last two weeks, with an average of a 19% increase. Still, these trends remain below normal levels, with the average person’s activity still 30% lower than usual.

Not surprisingly, some of the slowest recovery is in the areas that are most dense and were hit the hardest by COVID-19. And the future remains extremely tenuous: the Southeast has been one of the most aggressive areas to reopen, but new virus hot spots are emerging in the region.

U.S. Change in Average Weekly Retail Visits (vs. Jan 30 - Mar 4)


Source: Novantas Analysis, NovaLocation, PlaceIQ

COVID-19 has obviously also had a significant impact on banks, with many closing large portions of their branches and others shifting to appointment-only settings in the branch and a focus on drive-through tellers. The SalesScape dataset, which captures sales and service data for branches across the U.S., shows that branch-based sales in the last week of March were down a whopping 67% relative to pre-COVID levels.

From a transaction standpoint, total volumes were down 12% in March even though there were only one-to-two weeks of significant COVID impact. But 20-25% of branches were relatively unimpacted in March, with transaction volumes still in line with historic levels.

This data help to underscore that a one-size-fits-all model is not going to suffice as institutions develop their re-opening strategies. And these trends will require constant monitoring as banks weigh the long-term impacts of COVID-19 on the network and staffing.

The pandemic has had a massive impact on branch volumes and transactions near work centers, consistent with the decline in traffic overall. At a high level, work center visitation plunged by a stunning average of 69%. This is unlikely to return to near-normal levels any time soon since many companies have already said that they won’t be headed back to the office until well after the end of the summer. (And even those that bring workers back will likely do so at a very slow level.) Banks will need to consider what this means for staffing as these work center branches were historically some of the busiest.

Branch Sales – Week of March 27th vs. Prior Weeks (Indexed to Pre-COVID)

Branch Transactions – March 2020 vs. Prior Months

Source: Novantas Analysis, Novantas SalesScape


Across the industry, we have now seen bankruptcies at large department stores (Niemann Marcus, JC Penney), discount stores (Tuesday Morning, Stage Stores), apparel companies (J. Crew) and restaurants (Le Pain Quotidien). And other big retail names have indicated that permanent store closings are likely. (Nordstrom, Bath & Body Works.)

Even though markets across the industry are beginning to open up, retail sales are unlikely to return to normal levels. People will continue working from home and social distancing/safety measures will severely inhibit the browsing and spontaneous shopping habits that are part of the American experience. At the same time, small businesses and consumers will eventually drain the economic-stimulus dollars that have helped them in recent weeks.

This retail reckoning likely means that banks should start renegotiating real-estate leases by July in order to reduce operating expenses. Areas that will be hardest hit are retail locations in malls, near department stores and in downtown areas where the traffic has declined the most and vacancy rates will increase significantly.

It will, however, take some for these dynamics to play out and banks may have the strongest negotiating power toward the end of the year. After all, a prolonged COVID transition will not be able to support all businesses equally, creating continued uncertainty for banks about the future of some branches.


Customer average balances have remained relatively stable lately, but dipped slightly in the latest week for those who received stimulus funds due to the absence of bi-monthly pay periods. The stable balances are likely due  to a combination of enhanced unemployment benefits, loan forbearance programs and sharp declines in consumer spending. Balance growth remains far higher than historical levels, driven by a preference for liquidity and stability, as well as depressed consumer spending.

With customers continuing to prefer liquid funds and banks unable to offer attractive rates due to the yield curve, CDs continue to decline at an annualized rate of 40% to 50%.

A full weekly deposit tracker is available to CDA clients. Contact Adam Stockton at for details.


The IMF warned that a large number of banking sectors in a group of nine “advanced” economies may fail to generate profits above their cost of equity in 2025 and that it may be difficult to fully mitigate profitability pressures. It also noted that banks may seek to recoup lost profits by taking on excessive risk.

A survey from LendingTree found that 36% of parents have tapped their children’s college funds to help cover expenses due to pandemic-related financial strain. The survey of more than 1,000 parents also found that parents have spent an average $1,000 on supplies to support their children’s remote learning.

Independent Bank Group and Texas Capital Bancshares terminated their five-month-old merger plans, citing “the significant impact of the COVID-19 pandemic on global markets and on the companies’ ability to fully realize the benefits they expected to achieve through the merger.” Several other financial-services deals have also fallen apart in recent weeks.

The U.S. division of casual-eating chain Le Pain Quotidien filed for Chapter 11 bankruptcy protection and said it hoped to avoid liquidation by selling 35 of its 98 stores to Aurify Blands LLC, owner of Little Beet, Melt shop and other restaurants.

More than half of small-business owners who received a loan from the Paycheck Protection Program expect all of their expenses to be forgiven, according to a survey from the National Federation of Independent Businesses. Nearly three-quarters of borrowers said they found the terms and conditions of the program to be difficult to understand.

The COVID-19 pandemic had a big impact on spending trends in April, according to data released from the U.S. Bureau of Economic Analysis. Personal income increased 10.5% to $1.97 trillion, partly due to stimulus payments, and personal consumption expenditures dropped 13.6% to $1.89 trillion as Americans stayed close to home. Meanwhile, the personal savings rate jumped to 33%, up from 12.7% in March and 8.2% in February.

The Boston Fed will hold a webinar for lenders on June 4 to provide more details about the infrastructure and operations of the Main Street Lending Program. The program, which hasn’t launched yet, is aimed at providing unforgivable loans to small-and-medium size businesses that were in sound financial condition before the pandemic but are now struggling to maintain operations and payroll.

Bloomberg reported that organizers of Money 20/20 still plan to hold their annual U.S. conference in Las Vegas in October. That article said attendance will be capped at 6,000, down from 10,000 last year.

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