Expect Many More Job Losses As High Street Banks Prune Their Branches

[interestrateripoff]

http://www.telegraph.co.uk/finance/comment...r-branches.html

But a bigger surprise is that there haven't been more closures across the industry. Bank workers should brace themselves for worse to come. It's likely Lloyds, for instance, will cut another 20,000 jobs.

It is easy to blame bank executives for bringing this about. And to a large part they are to blame. If HBOS executives had not pursued such reckless lending policies, then the bank may not have been forced into the arms of Lloyds, now faced with cutting overlapping branch networks in towns and cities across the UK. But what is likely to be one of the worst affected industries for job losses is not simply being hit by the credit crunch and its economic fallout. There are other forces at work.

Branch networks have been shrinking for a decade; more than 3,000 have disappeared from our high streets since 1997. Even in good times, however, the 12,000 or so left is not sustainable. Bank mergers have played their part. But so too have our own changing habits. Online and telephone banking are mainstream, vastly reducing the need to visit branches. Not all of those branch workers will be re-employed in call centres.

But the economics of keeping what are, in effect, shops open when both prices and demand for the most profitable merchandise (loans) are falling doesn't make sense.

Banks are under conflicting pressures. Regulators want them to be more prudent with balance sheets and maintain higher levels of liquidity, while politicians are keen for them to expand balance sheets and commit funds to more lending. Only last month Michael Geoghegan, chief executive of HSBC, pointed out at the bank's annual meeting the likely impact of this when combined with the Bank of England's decision to cut interest rates to 0.5pc. "We have maintained, and will continue to maintain, a liquid balance sheet. However, it is worth noting that with interest rates at historic lows, the cost of maintaining this liquidity is high, and the economics of running a major retail network do not stack up when deposit margins have all but vanished."

HSBC is one of the few banks to emerge from the credit crunch relatively unscathed. If it's feeling the pain of branch networks it must be even more acute for Lloyds, Royal Bank of Scotland and the rest. On jobs, the worst has yet to come.

The laws of unintended consequences are a b1tch.

Anyway house prices can only ever go up.

[CHF]

...and yet another unintended consequence of low base rates though not necessarily material....

http://www.mortgagestrategy.co.uk/cgi-bin/...&dte=100609

[crashologist]

"But the economics of keeping what are, in effect, shops open when both prices and demand for the most profitable merchandise (loans) are falling doesn't make sense."

Shops incur running costs - especially empty shops with little turnover, and its the same for those prominently placed banks on the high street. Old-fashioned banking required turnover in order to extract profit margins. Interest rates for borrowers are just too high whilst interest rates for savers are just too low. This means less footfall in the bank with fewer opportunities to sell their products resulting in more branch closures.

[R K]

It's the (former) building societies that have been killed off.

We're now left with Lloyds, HSBC, Santander, Barclays and RBS, and Nationwide.

I guess the next big cull whenever that comes will take out perhaps 2 or 3 of those.

Edited June 10, 2009 by Red Kharma

[RichB]

So they pay out under 1%, but charge 5%+ on mortgages and 8%+ on loans - yet you think somehow they are strapped?

[cells]

12,000 branches?

Expect 10,000 of those to close by 2020 with some 100,000 jobs lost.

This is a natural evolution of business due to the internet.

I almost never go into the branch and use online banking only. More and more people will use online only banking.

[cells]

So they pay out under 1%, but charge 5%+ on mortgages and 8%+ on loans - yet you think somehow they are strapped?

I think its more to do with borrowing off other institutions and banks etc.

Why set up an extensive network to try and attract savings at 0.4% when you can pay an institution or another bank 0.6% and not have the headache of running branches and keeping customers happy.

But if interest rates were say 5%, then trying to attract savers via branches paying 3% would make sense.

Overall it is just the internet making things more efficient. Some 100k jobs will be lost to it and perhaps 20k jobs created to run phones/internet etc.

[Bloo Loo]

So they pay out under 1%, but charge 5%+ on mortgages and 8%+ on loans - yet you think somehow they are strapped?

sure, its the defaults thats killing them.

and the very very very very high wage costs.

[nohpc]

http://www.telegraph.co.uk/finance/comment...r-branches.html

The laws of unintended consequences are a b1tch.

Anyway house prices can only ever go up.

lol yea because the banks would be doing so much better if rates hadn't dropped. Duh!

[The Masked Tulip]

Isn't the reality that more people are doing online banking?