Bank bosses defend branch closures as customers go digital
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Major bank bosses say they must balance profitability with maintaining a physical presence in regional areas as customers increasingly move towards digital banking and choose to stay with their bank even when branches have been closed.
At a Senate inquiry hearing about regional branches on Wednesday, Commonwealth Bank chief executive Matt Comyn said that about 40 per cent of the bank’s 728 bank branches were in regional areas but that CBA had to maintain a level of profitability.
CBA chief executive Matt Comyn says most customers remain with their banks even when branches close.Credit: Alex Ellinghausen
“We have to make sure we’re not allowing or seeing too many or too large cross subsidies generated over time,” he said. “We want to maintain competitiveness in all of those markets and do a great job for our customers, but also make a sustainable return.”
Earlier this year, the bank vowed to keep all CBA regional branches open until at least the end of 2026. One issue, Comyn said, was that customers tended to stay with banks even when branches were closed.
While there was sometimes a temporary reduction in customer satisfaction, it tended to recover after 12 months, he said, with about 95 per cent of customers not choosing to change financial institutions following a branch closure.
“I hope that isn’t true because then our decision to persist with a much larger footprint in regional Australia over the next three years, commercially won’t be a good one,” he said.
The Australian Prudential Regulation Authority previously said regional and remote branch numbers across the industry fell by 29 per cent in the five years to June 2022 – a net decline of 677 branches.
Westpac chief executive Peter King said competition for customers in banking was intense and that the bank sometimes had to make difficult decisions on legacy branch locations that were underutilised. “Customers who only use a branch represent about 3 per cent of our 13 million customers,” he said.
NAB is one of the few banks that have not paused their bank closures, but the bank’s chief executive Ross McEwan said a moratorium delayed the inevitable, and that most affected staff had been deployed in other areas of the bank.
“At the end of the day, those branch closures happen as soon as the moratorium is taken off,” he said. “My view was, we should just continue to do the right thing with our business, making the decisions we need to make based around what customers are doing. Ninety-eight per cent of all our colleagues, when we do close a branch, have actually stayed with us in different jobs.”
While NAB has previously said about 8 per cent of its business banking customers exclusively used its branch network, the bank’s retail executive Krissie Jones said there had been a “really big change” in the way all of its customers were transacting, with 96 per cent of customers making a digital interaction.
ANZ chief executive Shayne Elliott said the process of determining branch closures was “not a formula that we run through a machine”, but that it was a sensitive topic to speak to people about.
“To go out to people and say, ‘hey, we’re thinking of making you redundant, what do you think?’ I don’t know that that’s a helpful conversation,” he said. “Consultation is probably not the right word, but we do this in discussion with our people … we’re talking with people on the ground every day.”
Elliott denied the bank incentivised branch closures, but said the bank also had an obligation to shareholders.
“We are owned largely by the people in Australia, through their superannuation funds,” he said. “We have an obligation to generate a fair return on their superannuation and pensions.”
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