There’s been a lot of doubt expressed recently by shorts as to whether Bofi really has an advantage over the other banks or whether their advantage is just on “risky” loans. Do you want to know what BOFI’s real advantage is? Why they are so much more profitable than the branched banks? Here’s why?
I’m currently staying in NYC, in Manhattan. Walking up 3rd Avenue in NY today, at 56th St I noted a huge Chase office on the SE corner of 56th (it took up half the block), and an Atlantic Bank diagonally across on the NW corner of the same intersection.
At the next corner (57th St), there was a big HSBC Bank branch on the SW corner and a TD Bank office on the NE corner.
Then, at the next corner, 58th Street there was a Capital One branch on the SW corner, a big Wells Fargo branch across 58th, on the NW corner, and a big CitiBank branch right next to the Wells Fargo branch (those two took up more than half the block). That was three banks in a row.
Then there was one intervening store, and continuing to the other end of the block, on the same side (at 59th) there was a Bank of America branch, and another Capital One branch diagonally across the intersection.
And this is just one stretch in NY, just from 56th to 59th Streets, on just one Avenue, in a a basically normal, mostly residential (apartment houses), and some office buildings, neighborhood. And nine bank branches, and more than half of them huge!!! Can any of them be operating profitably? I doubt it. As an aside, there must be 35 or 40 just Citbank locations alone in lower Manhattan (below Central Park).
Can you imagine what the banks are paying to lease these huge prime corner spaces? In Midtown Manhattan? Which mostly stand half-empty now? And pay for electricity, air conditioning, cleaning services, phones, staffing salaries, computers, etc. These dinosaurs must have taken their 20-year (or longer) leases to lock in the space, before they had an inkling that most banking business would go to the Internet. They must have 17, 14, 12, 10, 8 years left on most of their leases. And even then they’ll be afraid to close most of the branches because they are attached to the old way of thinking. I think BOFI has a long runway of cost advantage ahead of them.
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