Banks: branch closures are accelerating

Posted on Nov 23, 2021 at 6:15 am

The news caused a stir in Belgium. Dutch bank ING announced at the end of last week that it would close some 50 branches in the country. The network would thus grow from 405 branches at the end of 2021 to 350 a year later. The majority of these closures concern the bank’s own network, which will go from 94 branches to 50. The rest of the network is in fact made up of franchised offices, a common model in Belgium and the Netherlands.

These closures will not cause job loss, assured the management, with staff redeployments to larger agencies, able to bring more expertise to clients, in a context of increasing digitization of services. Last year, ING had already eliminated around sixty branches of its own.

Despite a context of strong recovery and record results, banking networks are continuing to lose weight throughout Europe. The phenomenon does not spare France. According to a study carried out by the firm Sia Partners, the number of agencies should decrease by 15% by 2024, to fall from 32,276 at the end of 2020 to 27,578 agencies.

Record density

The pace should accelerate slightly compared to previous years. Over the 2016-2020 period, the size of the network in France had indeed decreased by 13.4%. The drop in branch visits, with the growing use of online applications and services, in a market context still constrained by the low interest rate environment, is leading banks to further optimize their distribution networks.

The Covid-19 pandemic has further reinforced this trend, with increased use of remote banking solutions, even if the branches remained open during the various lockdowns. Specific operations such as the ongoing merger of the Societe Generale and Crédit du Nord networks also contribute to the phenomenon: nearly 30% of the group’s branches should disappear by 2025.

However, the situation remains different compared to other European countries. The 15% reduction in the number of agencies in France by 2024 can be compared with a drop of around 25% for the rest of the continent, according to Sia Partners, similar to what has been observed in recent years.

“The French banking sector remains characterized by a high density in terms of branches,” recalls Marin Delattre, manager at Sia Partners. According to the European Central Bank, there are 481 branches per million inhabitants in France, against 472 in Spain, 290 in Germany and 211 in Belgium.

A sector dominated by mutualists

The sector remains dominated by mutual banks such as Crédit Agricole, BPCE and Crédit Mutuel. Organized by regions, they claim their attachment to a model of proximity, which results in a close network of the territory. They are closing branches, but at a rate less than half, on average, that of so-called “commercial” banks such as BNP Paribas, Société Générale and LCL.

In a very competitive industry, where customers remain attached to a local service, establishments do not forget either “the risks associated with branch closures, which can lead to losses of market share and a possible deterioration of the market. ‘image perceived by customers,’ comments Marin Delattre.

Since the start of the health crisis, banks have also tried to adapt the organization of work in their networks. This is the case, for example, with BRED (Banque Populaire), which has adopted the model of branches open only by appointment. “There is a global desire to optimize the functioning of the networks. But this will not only happen through outright closures, ”predicts Marin Delattre.

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