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International Bancshares Corp. is closing 55 of its smaller branches located in grocery stores, the bank holding company said Thursday. It said it must cut costs because new federal rules that cap the debit card fees banks can charge retailers will hurt revenue.
The Laredo, Texas, company said the closings will eliminate about 500 jobs, but some of the affected employees will go to work in remaining branches of its International Bank of Commerce subsidiary. At the end of 2010, IBC had nearly 3,000 full-time employees.
The company will still have 219 branches operating. Customers can access their accounts at the remaining branches, the bank's website and the company's ATMs, IBC said.
The revenue from debit card fees, which retailers pay whenever a store customer pays with a debit card, has been a critical income source for banks. Many banks have warned that they would have to cut back on services such as free checking and rewards programs to offset the loss after the cap takes effect on Oct. 1. Chase, PNC Bank and Wells Fargo have ended or scaled back their debit rewards programs, citing the new regulation. The availability of free checking accounts also declined last year for the first time since 2003.
IBC said it had used the revenue from debit card fees to cover the cost of free products and services for customers. The company chose to shut down the branches to curb costs, so that it can keep offering customers the free products.
The company said closing down the branches would result in charges of $5.6 million, before taxes, in the second half of 2011.
International Bancshares, with $11.8 billion in assets, has operations in Texas and Oklahoma. Its shares fell 11 cents to $12.92 in early afternoon trading Thursday, amid a broad market plunge.