U.S. Bancorp Adding To Its Grocery List Bank Plans Wave Of Small Branches To Catch Up With The Competition

U.S. Bancorp is jumping aboard the grocery store bandwagon in a big way. The Northwest’s largest bank will soon sign a deal with Albertson’s Inc. to place about 135 small branches in Albertson’s grocery stores over the next three years.

Since November, U.S. Bancorp has opened branches in Albertson’s stores in Sherwood, Ore., Orchards, Wash., and Nampa, Idaho. It is only the beginning of a significant multiyear expansion.

Albertson’s spokesman Mike Read said the bank will open about 45 in-store branches a year over the next three years.

U.S. Bancorp officials would not discuss the Albertson’s pact because it isn’t final. But they confirmed the institution likes the lower costs and customer satisfaction associated with in-store branches.

“We’re very interested in the in-store concept,” said Cathy Haffner, U.S. Bancorp vice president and manager of instore banking. “This is another way to provide greater convenience to our customers.”

As little as five years ago, many bankers were cautious about in-store branching. They worried their customers wouldn’t accept the notion of tending to their financial affairs outside a traditional branch.

But customers had no such trepidation. Haffner quoted a banking industry survey of grocery shoppers showing that a bank was the third-most requested service behind only a bakery and a deli.

Banks like them, too. They’re cheap and efficient. And the estimated 35,000 visitors a week to a large retail center offers an attractive base of potential customers.

In-store branches cost less to build - between $200,000 and $300,000 vs. nearly $1 million for a new stand-alone branch. They are also cheaper to operate. Some of U.S. Bancorp’s in-store branches will boast just one employee.

Jay Tejera, a Dain Bosworth analyst specializing in bank stocks, estimates in-store branches generally need between $6 million and $8 million in deposits to break even. Stand-alone branches usually stay in the red until their deposits reach the $25 million range.

“Grocery store branching is catching on big time,” Tejera said. “When you look at the numbers, it’s surprising only that it hasn’t happened faster.”

U.S. Bancorp has been slow to join the in-store trend, particularly in Oregon. It has just 32 in-store branches currently, nearly all of them in Washington.

That puts it far behind Washington Mutual Inc., which boasts the Northwest’s largest in-store branch network at 74 branches. The bulk of Washington Mutual’s grocery store branches are in Fred Meyer stores.

As Tejera pointed out, there are far more banks than there are significant grocery chains, which has set off a scramble among banks to lock up good grocer partners. Landing Albertson’s, the fourth-largest grocery chain in the country and one of the majors in the Northwest, is an important accomplishment for U.S. Bancorp, Tejera said.

The bank could have found itself frozen out of the grocery game but for its acquisition of West One Bancorp. West One and its Boise neighbor Albertson’s were close partners.

West One and Albertson’s had already signed an exclusive deal that would have placed about 20 West One branches inside Albertson’s grocery stores, Haffner said.