EUROPE’S big banks shut or sold 5,300 branches last year and the closures are likely to accelerate as customers embrace speedy online banking over traditional face-to-face contact.
Yet many lenders are holding back from big cuts for fear of choking off a source of new business, alienating older customers and sparking a political backlash in isolated regions.
Branch closures are greeted with dismay when communities are left without a local bank. But they reflect an online revolution that is transforming the way people do everything from buying holidays and comparing insurance prices to borrowing library books and renting DVDs.
They are also an ideal way for lenders to cut costs and build up more capital after the financial crisis.
The figure on closures or sales last year was compiled by Reuters based on year-end statements from 26 of Europe’s 30 largest listed banks. As many as 40 per cent of Europe’s bank branches are expected to close between 2013 and 2020 as the “digitalisation” of banking takes hold, according to consultancy firm Bain & Company.
That would mean 65,000 fewer branches across the EU, based on European Central Bank data showing there were almost 218,000 bank branches across the region at the end of 2012.
“It’s only the start of branch closures,” said Bain’s head of global retail banking, Dirk Vater. “I’ve been a banking consultant for more than 20 years. For the first time, we’ll really see some dramatic changes.”
The most drastic cuts have come in Spain, where many banks are still struggling to recover from a property crash and debt crisis and have taken a hatchet to costs. A September 2013 study by Deutsche Bank analysts found Spain had more branches per person than any other market they track.
Bankia, cobbled together from seven failed Spanish regional banks and bailed out in 2012, has slashed 37 per cent of its network, or 1,100 branches in 2013.
Online banks have already shown it is possible to do without an established retail network and traditional lenders are scaling up their online networks. The shift to internet banking means fewer people are choosing to visit their local bank. Royal Bank of Scotland, which has more branches than grocery chains Asda and Sainsbury’s combined, said it has seen a 30 per cent fall in branch transactions since 2010.
Deutsche Bank analysts say retail banks can cut their expenses by up to 15 per cent over the medium term by cutting branches and repositioning those that remain into smaller offices with fewer staff.
Deutsche’s head of European banks research, Jason Napier, believes a UK bank can get by with as few as 500 branches in the long term. But Lloyds has 2,254 and has committed to keeping them all open under a strategic plan that runs to the end of this year.