Lloyds branch cull signals more job cuts

Britain’s six largest banks plan closing up to 75% of branches

LONDON: UK banks are set to accelerate branch closures with Lloyds Banking Group Plc the latest to eliminate thousands of jobs, as customers shift to online transactions.

Britain’s six largest banks will trim their 8,000-strong branch network by as much as 75% in the next decade and will be able to serve most of the country with about 500 outlets each, Jason Napier, an analyst at Deutsche Bank AG, said in a report last month.

Branch transactions are falling 10% a year, according to the British Bankers’ Association.

“Branch numbers have been in decline for some time, but will accelerate from here,” Napier said in the Sept 8 report.

The UK has seen “strong growth in mobile, tablet and online banking registration, even stronger increases in transaction volumes, and double digit annual declines in branch footfall.”

Banks are seeking to harness customers’ use of the Internet, mobile-phone services and automated teller machines to reduce employment and cut costs.

While closures are seen as controversial by some consumer groups and lawmakers, HSBC Holdings Plc and Royal Bank of Scotland Group Plc have seen clients’ visits to outlets drop about a third since 2009, the BBA said.

As much as 40 % of consumer-banking costs come from their branches, according to Deutsche Bank.

Lloyds could increase its profit by 10 % over the next decade by closing half its 2,253 branches, improving its credit rating and capital generation, Deutsche Bank estimates.

Britain’s largest mortgage provider is poised to eliminate thousands of jobs in what may be the biggest round of cuts since at least 2011, a person familiar with the matter said yesterday.

Lloyds shares fell for a second straight day, decreasing 0.8% to 76.55 pence at 8:12 a.m. in London.

They have dropped 3.1% this year, while RBS gained 9.4%.

In 2013, customers made 6.9 billion bank transactions using personal computers, up from five billion in 2009, according to the BBA, which represents the nation’s biggest banks.

“While unpalatable for the older genera- tion of customers, the irreversible trend toward use of ATM and mobile phones means branch closures are a trend that’s likely to continue,” Simon Willis, an analyst at Daniel Stewart Securities Plc in London, said.

“The political straitjacket will be removed to a certain extent as government bows to commercial realities.”

RBS, which is 80 % government owned, will provide about half its services via mobile phones in 2017 compared with 11% in 2010, Deutsche Bank’s Napier estimates.

About 5% of service transactions will be provided by branches in three years, down from 24 % in 2010.

“Banks have been genuinely quite surprised at the pace of adoption of mobile banking,” Rob Watts, a spokesman who helped write the BBA’s “The Way We Bank Now” report this year, said by telephone.

“It’s been far faster than the take-up of Internet banking a decade before.

“People tried that and got comfortable with it, learned to trust it, then when mobile banking came along were ready to quickly migrate.” — Bloomberg