Banks Aim to Turn Branches
Into Cool Places to Gather

The staid bank branch is getting a makeover.

As competition for deposits intensifies, a number of banks are trying to capture customers' attention by revamping their buildings to look more like coffeehouses and retail boutiques, and less like the stodgy brick-and-mortar operations of old. The new designs stress more open spaces and softer lines to create a less-formal environment, and more common areas and activities to encourage people to linger longer -- and get them to shop for more banking products.

Umpqua Holdings Corp.'s Umpqua Bank, with branches in Oregon and California, is building 11 branches this year that include couches, Wi-Fi Internet access and a movie screen in some branches that drops from the ceiling for "movie nights." (It recently showed "March of the Penguins.") Pilot Bank, owned by Pilot Bancshares Inc. of Tampa, Fla., is installing children's play areas. Union National Community Bank, a unit of Pennsylvania's Union National Financial Corp., has dropped its name altogether from its signs and rebranded its newest branches Gold Café, where the staffers are trained to prepare espresso as well as pitch the bank's products.

Big banks, too, are remaking their branches. Wachovia Corp.'s new outlets include more common areas for children and parents, and traditional teller stations are replaced by long desks that resemble hotel concierge desks. Wachovia plans to build 70 to 100 of the redesigned branches this year. PNC Financial Services Group Inc.'s PNC Bank is unveiling more than 40 newly designed branches this year that feature amenities such as Internet cafes and coffee bars.

The efforts represent a shift for the banking industry, which spent many years encouraging customers to do their business online or at automated teller machines. Now, as deposit growth slows, and bank profits come under pressure, "bankers realize that the branch traffic is really their best shot" to draw more customers, says Paul McAdam, senior managing director at BAI, a financial-services professional organization in Chicago that is conducting a study on bank branching strategies.

A number of banks say the design changes are paying off in bigger deposits and lower employee turnover. Bank of Smithtown, owned by Smithtown Bancorp of Hauppauge, N.Y., has installed coffee bars, stools and plasma-screen television sets in nearly half of its current 13 branches. Last year, when the bank opened three more branches in this new style, those branches accounted for about a third of the bank's $183 million of deposit growth for the year. Washington Mutual Inc. credits in part its current branch design, which it calls Occasio, for the thrift's adding about 900,000 net new checking accounts last year, a 10% increase from 2004. Last month, WaMu's retail-banking unit reported that first-quarter profit rose nearly 11%.

Umpqua Bank customers Robert Curzon and his wife, Jill Duncan, real-estate agents in Bend, Ore., say when they're away from home they often stop by the local branch to print out business documents using the bank's computers or to have a cup of coffee. Ms. Duncan says she is planning to attend a yoga class tonight at one of Umpqua's branches. The couple say they have moved more of their banking business to Umpqua in recent years as the bank experimented in their hometown with a prototype of its new branch design.

After technology stocks crashed in 2000, bank deposits grew rapidly, and banks went on a branch-building binge to win business. Several banks began testing various branch prototypes, and some of these new designs are now being rolled out in more markets.

Some analysts say banks can't sustain their recent aggressive spending to build new branches, as deposit growth slows and construction costs rise. But some banks say the revamped branch designs help offset this problem because they are cheaper to build. Umpqua Bank says the smaller of its new branches, which it calls neighborhood stores, are half the size of its normal outlets, and can be built in 45 days, compared with 120 days for a typical bank branch. Umpqua says this cuts its construction costs by about 50% from its previous level. PNC Bank says the cost of operating its new branches will be reduced by about 45% because the new design uses more natural light and a more-efficient heating and air-conditioning system.

Among the changes, banks are revamping traditional teller lines and bankers' offices to encourage staff to interact with customers. Washington Mutual, an early innovator of branch design, says about two-thirds of its 2,140 branches now have the Occasio design. Here, tellers work with customers at free-standing work counters, handing customers a receipt with a code that they enter into a cash-dispensing kiosk, speeding transactions.

Citigroup Inc.'s Citibank, which is adding as many as 100 new branches this year, is replacing traditional walls with glass dividers that provide privacy but also create a more open look. The customer-service desks have been physically expanded and employees working at the desk are now trained to handle more types of transactions, such as ordering ATM cards and checks for customers. Rectangular desks in the new branches have been replaced by round tables and curved furniture allowing the staff to sit closer to customers and create the mood of having a private relationship with customers, a bank spokesman says.

J.P. Morgan Chase & Co. says its new branches have more wood and "softer" colors and are designed to create a "warm and trustworthy" environment. The bank, which has been building new branches in this format since 2003, has been refurbishing all of the branches it acquired when it bought Bank One to have the same look and is planning to update the roughly 500 Chase branches in the same style this year.

Banks are also changing the way they train branch staff in order to improve efficiency and sell more products. Citizens Financial Group Inc., owned by RBS, seeks out people with retail experience to work at many of its new branches. At Commerce Bancorp Inc.'s Commerce Bank, local branch managers make many lending decisions instead of having to get approval from the bank's headquarters, speeding up loan-approval times.

Banks are also changing the way their products are promoted inside the branch. Product pamphlets, for example, are being replaced with displays that help customers visualize the available bank products. Bank of America Corp., which announced in 2003 that it would build 550 newly designed branches over a three-year period, has been placing three-dimensional houses, about six feet tall, inside roughly a third of its branches. Known as "mortgage centers," the displays are used to promote the bank's mortgage products.

Plasma-television screens and other digital signs are being installed in many of the newest bank branches as another way to promote the bank's products and create targeted messages for local branches, says Kevin Blair, president and chief operating officer of NewGround, a financial-services design firm.

Email your comments to rjeditor@dowjones.com.