“The data is clear, many branches are closing,” says finance consultant Martin North from Digital Finance Analytics.
“We’re seeing branches close at a faster rate than we’ve ever seen before.”
Annual data collected by the Australian Prudential Regulatory Authority tells the same story.
It shows banks, or authorised deposit taking institutions as APRA calls them, shut doors on nearly 300 branches over the year to June, about 5.3 per cent of all outlets, leaving the country with 5314 bank branches.
Last year’s decline was sharper than a year earlier when about 3.6 per cent – or 201 – bank branches closed.
The trend is more pronounced in the large cities, but regional areas – where bank branches are often the lifeblood of rural communities – haven’t been spared either.
Regional towns lost 4.1 per cent of their branches last year, while their city cousins saw 6.2 per cent disappear.
Younger people are less likely to go into branches, and that’s going to continue.
Finance consultant Martin North
The closures are being driven by a combination of “digital migration” and demographics.
More people are doing more of their banking on smartphones, and as a result branch visits have fallen significantly, Mr North said.
“Younger people are less likely to go into branches, and that’s going to continue,” he says.
Summerhill’s bank was one of 39 outlets closed by CBA in the past year, the group’s most recent financial results show, reducing its number of operating branches to well under 1000.
It was also the last remaining bank in the Summerhill area.
“We knew the guys who worked there and if we needed anything immediately, it was easy to run across and get it sorted,” said a local trader, who didn’t want her name published.
“People were disappointed that it closed. They still use branches for certain things like loans. I’m not sure how it impacts on older people either,” she said.
Those concerns are familiar to CBA chief Matt Comyn.
In a speech to the Trans-Tasman Business Circle earlier this year, he acknowledged the public sensitivities around the topic. After he personally wrote to the bank’s eight million customers, many replies gave him feedback about its branch network, he said.
“Even as the number of branches reduce, and the number of physical points of presence, we will retain and maintain a very large branch network .. the largest in the country,” Mr Comyn sought to assure customers.
Westpac’s redundant branch in Mentone Parade, Mentone, is still paying $116,186 a year in rent plus GST despite standing empty now. It will do so until the lease expires in December 2020.
It’s not the only Melbourne branch where it’s less painful for the bank to continue paying a lease, but remove staff and operations than to stay open for business. Others include northern suburbs branches in Rosanna and Doreen.
“For Mentone Parade, Rosanna and Doreen for example, like many of our suburban branches, less than 2 per cent of transactions were taking place over the counter,” a Westpac spokeswoman said.
We don’t make any decision lightly and our main considerations are usage, location, proximity to other services and community needs.
“More and more customers choose to undertake their banking in different ways, for example digital banking. We don’t make any decision [to close] lightly and our main considerations are usage, location, proximity to other services and community needs,” she said.
Around the corner from Westpac’s shuttered Mentone branch, clustered together are branches of CBA, NAB and the Bank of Melbourne.
Mentone shop owners and locals won’t go without banking services but there is always an inherent fear that the rot has set in, and other banks will follow.
And in a tough retailing environment, it’s not easy for landlords to find new commercial tenants.
“The banks used to be as safe as you could get as far as an investment was concerned. They now don’t represent the certainty that they once did,” says a Melbourne real estate agent who has dealt with multiple branch closures.
The CBA’s efforts to trim costs by closing 4.3 per cent of its branches over the year were at the lower end of the pain inflicted by the big four.
National Australia Bank led the charge slashing 95 branches or 9.6 per cent of its network, which left it with 892 shopfronts around the country. It was closely followed by ANZ which reduced its network by 8.3 per cent.
Westpac, after cutting branch numbers by 6 per cent, was left with 955 branches, a larger network than CBA with its 918 branches, although that’s a figure which excludes CBA’s subsidiary Bankwest.
Compared to the playbook for profitability being prescribed by some analysts, the bank’s collective cuts were relatively mild.
Analysts from finance house Morgan Stanley recommended in a Roadmap to ‘Branchtopia’ report released late last year that the big four cut their networks in half.
By their accounting, the ANZ’s network is almost as valuable as Westpac’s despite its much smaller branch numbers, while NAB has the least valuable distribution platform.
“Customers are increasingly going digital, which should give the banks more room to rationalise branches over time,” the Morgan Stanley analysts argued. Hollowing out branches by removing cash from premises could also cut a third of a branch’s direct costs, they added.
“Branchtopia could see the banks convert all branches to cashless and close 50 per cent of them, saving about 6 to 9 per cent of a major’s costs, with Westpac and CBA best positioned [to benefit].”
But “heightened public scrutiny” made it unlikely the banks would aggressively reduce their branch networks within the next 12 months, they conceded.
Still, the banks now face a new reality of modest revenue growth and tougher regulations after the Hayne royal commission, and will be under increasing pressure to make changes and cut costs.
Australia has “way more” branches per head of population than Britain and most other developed countries, Mr North says.
“We are getting to the same point here now where the UK was 15 years ago. We ain’t seen nothing yet,” he says.
“We are going to see a lot fewer bank branches in the years ahead.”
Property Editor at The Age and BusinessDay journalist for Fairfax’s theage.com.au, smh.com.au, watoday.com.au and brisbanetimes.com.au.