Using micro-data on bank-SME relationships in France, we show that banks specialize locally by industry and that this specialization shapes the equilibrium amount of lending. We use the reallocation of firms’ accounts from closed branches to nearby branches of the same bank, as a source of quasi-random variation in the match between a firm’s industry and the industry of specialization of its bank. Reallocation is associated with a significant and persistent drop in credit, the magnitude of which doubles for firms transferred to a branch less specialized in their industry.