Branch closures and redundancies at European banks


Germany’s second-largest commercial bank, the heavily loss-making Commerzbank, said it would lay off one-third of its domestic employees and reduce the number of its branches from 790 to 450, which one of its major shareholders, the American investment company Cerberus, has been trying to get for some time. In Italy and Spain, a number of banks are merging, so thousands of branches are expected to close.

American consulting firm Kearney expects that

over the next three years, a quarter of the approximately 165,000 branches operating in Europe will be closed.

The WSJ pointed out that banks are one of the weak links in the European economy and have changed slowly. Compared to their American rivals, European financial institutions find it difficult to generate enough money to support credit growth. And when the epidemic erupted, they were still moaning the burdens of bad credit inherited from the era of the sovereign debt crisis that began a decade earlier.

The coronavirus epidemic and the economic crisis it caused have forced banks to accelerate the pace of change. The European Central Bank has instructed the banks to restructure, giving them the opportunity to merge in order to reduce costs. The governments of European countries, which have long opposed the merger of banks leading to redundancies, have changed their position. And low stock prices have forced the leaders of financial institutions to take action.

European banks are low cost-effective and have high expenditures relative to revenues. One of the easiest ways to cut costs is to close your accounts.

The top five Spanish banks downsized their branch network by 8 percent last year. Nevertheless, among the euro area Member States, Spain is still at the forefront in terms of the proportion of commercial bank branches in the population. According to the International Monetary Fund in 2019, there were 49 accounts for every 100,000 people in a southern European country, compared to only 30 in the United States, for example.

The largest Italian bank, Intesa Sanpaolo, has cut 10,000 jobs and closed hundreds of bank branches after acquiring one of its Italian rivals, UBI Banca, last year. Nevertheless, it still operates more than four thousand branches, roughly the same number as U.S. JPMorgan Chase and Bank of America, even though the Italian financial institution serves a smaller market than its U.S. rivals. Intesa plans to keep at least three thousand branches in the future, but will transform them into a hub for selling investment assets and insurance.

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Source: Portfolio.hu – Bank by www.portfolio.hu.

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