Tough road ahead for bank branches

Meredith Whitney, a star Wall Street analyst who covers the banking sector, scored a zero on the shock-o-meter with her latest report: Federal banking regulations will likely decimate the industry.

The numbers in the report are nonetheless jarring.

For instance, Whitney predicts U.S. banks will close 5,000 branches by the middle of 2012, according to a summary of the report from Bloomberg News. She further projects banks nationwide will shutter 10,000 branches by 2015.

Whitney also says the number of U.S. households nationwide without access to the traditional banking system will increase to 41 million by 2015 from 30 million in 2009.

The reason for the industry decline, says Whitney, is banks already deal with both shrinking profits from decreased loan demand and lower fee revenues.

The new regulations, under the guise of reform in the Dodd-Frank Wall Street Reform and Consumer Protection Act, only further exacerbate the situation.

“The most regrettable unintended consequence of some of the quickly written regulatory reform, we believe, will be the inevitable 'debanking' of the U.S. financial system,” wrote Whitney, who runs New York-based Meredith Whitney Group. “Fewer 'bankable' customers will contribute to the trend in fewer bank branches.”