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Banks have been cutting branches for years

Big four retail footprint is down 10% from the recent peak, with more cuts to come.

While there’s been an outsize (and bizarre) outcry about FNB’s decision to close somewhere between 25 and 40 branches in a round of ‘optimisation’, the country’s big four retail banks have been steadily cutting the number of branches for years.

Between them, the big four had 3 005 branches at the end of the 2011 financial year (December 2011 for all but FNB, which reports to end-June). At the end of 2015, this number had dropped to 2 862. Only a 5% drop, sure, but remember that this is against a backdrop of a growing (albeit stuttering) economy, an increase in client numbers (barring Barclays Africa Group’s Absa, which has only just started growing again), and strong retail bank earnings growth in the period.

Absa has trimmed over 100 branches in the last five years, Standard Bank over 50, FNB has almost exactly the same number of branches as it did in 2011 and Nedbank has added 13. The other three barring Absa – which has traditionally had a mammoth footprint – peaked in 2013/14.

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Measured from their respective peaks, Absa and Standard Bank are down 11%, while FNB and Nedbank are down 7%. At the end of 2015 (June 2015 for FNB), Absa retained the largest footprint with 784 branches, FNB had 723, Nedbank 708 and Standard Bank 647. Those numbers are more similar than you’d first think (believe it or not, Capitec – not part of this analysis – is also in the ballpark with 691). Based on the operational ‘reviews’ underway as well as the trends in the past two years, we’ll surely see the big four all slip to under 700 branches by 2017.

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Traditional banks’ branches have high cost bases, which is one of the reasons they’ve been pushing hard to shift transactions to electronic channels. Some have been more successful than others. This is (obviously!) not a phenomenon unique to South Africa. The UK saw a 7% reduction in bank branches last year, to leave 8400 retail locations. In the last decade, the number of branches has dropped by a quarter. It’s the same picture in markets like the US. Bank of America has closed a fifth of its branches in the last five years.

It’s not just the number of branches that’s declining. Retail floor space is shrinking too. The big four don’t typically disclose their branch floor space year to year, but in April 2015 Nedbank reported a “reduction in retail floor space of 10 418 square metres”. Separately, in 2014, it said it would look to cut 15% of floor space over the next five years as it rolled out its ‘bank of the future’ branches.

I argued last week that branch cuts are a good thing, given that manual transactions are shifting to digital/automated channels very rapidly. While banks are incentivising customers to use these channels, most younger customers have no interest in using branches in the first place.

Banks don’t split out the number of staff working in branches versus elsewhere in retail banks, but you can bet that – over time – this number has decreased per branch (and because branch numbers as a whole are down, has declined in absolute terms too). By and large, banks are still adding staff, however.

Technology (‘IT’) spending continues to increase largely in line with overall operating expenses. But, if you look at technology expenses functionally, i.e. including staff costs, these are running well ahead of overall cost growth. For example, Standard Bank Group’s total IT function spend (including salaries) was R12.892 billion in 2015, 11% higher than in 2014. And Barclays Africa Group spent R6.675 billion on IT in 2015 (across all its operations), a 7% increase on the year prior.

This trend is only going to accelerate as transactions (especially payments) continue to be offloaded to internet and mobile banking, with the continued push to native mobile apps, and the increased security they bring (they aren’t susceptible to phishing, for one).

Deposits have been moved to the banks’ ATM networks, as the penetration of (expensive but cheap at the price) automatic cash-accepting devices increases. But, don’t for a second think that the number of ATMs is growing at all. Only two of the big four are adding ATMs, and only one of those is doing so aggressively. More on this, tomorrow…

* Hilton Tarrant works at immedia. He can still be contacted at



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The bigger banks are basing their decisions that their clients will remain loyal and stay where they are despite their footprint getting smaller as time passes. However, Capitec Bank is making huge gains on the bigger banks and soon they will spread their branch bases to more places. They are of course the cheapest way to bank too. Further proof that size is not always a guaranteed magnet!

Retail banking in the 4 largest banks is nothing more than smoke and mirrors. They are all making every effort to move their clients away from branch banking to electronics, yet they continue to spend billions on making their branches look attractive and appealing to the eye – what for I have no idea. If one had to look at the build of these branches you would find that their cost per square metre of build would be well upwards of R 12,000 per m2 – which is ridiculous. They say banking has changed well that’s nonsense transactions today have the same primary activities that they had 40 years ago, the only change is that in many cases they can be done more quickly with the advent of computers (which were around in banks in the early 70’s). What has changed is the service – it has become abysmal, and, the level of knowledge in the branches is deplorable. I very seldom venture anywhere near my bankers branches as I am guaranteed that the client facing personnel are inept and incapable of solving my problem without first referring to a manager and or head office personnel for guidance.
If banks stopped worrying and constantly changing their branch images as frequently as they do, then there would be a huge benefit for it’s customers in them charging lower fees/charges

So the big 4 have closed 143 branches.How many have Capitec opened?

That hasn’t stopped prices going up and up and up!

Capitec have come from a low base while the big 4(Nedbank to a lesser extent) have come from a high base.Capitec s offering is still relatively limited and for the time being,i believe they will keep it that way.

End of comments.



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