HSBC to close branches

Posted by Barry Stamp in Banking on 11 June 2015 - Barry is Managing Director at checkmyfile

News that HSBC is to cut 8,000 staff and around 100-120 of its 1057 branches in the UK will always be closely followed by speculation as to which branches will be closed.

Branch rationalisation is not new to the UK. When District Bank, Westminster Bank and National Provincial Bank merged to form Nat West over 45 years ago, often it found itself in possession of three bank branches in the same high street. The decision then was based on the most capacious to handle the merged local business and to accommodate growth. Similarly, Barclays and Martins did the same on a smaller scale, at around the same time. In the late 1960’s, there were often five different bank brands on the high street, but after a period of around 7 years, these became just two.

More recently Santander has had the same issue, rationalising Alliance & Leicester, Abbey National and Bradford & Bingley branches.

HSBC is in a completely different situation. It already has relatively poor UK representation with just 1,057 branches, compared to over 1,600 at Barclays and a similar number at NatWest/Royal Bank of Scotland. HSBC branches are also not evenly distributed. HSBC is based on the Midland Bank network which originally centred on Birmingham. When a branch of HSBC is closed, it is likely that customers won’t be able to find another branch quite as nearby as they might expect.

After RBS acquired NatWest, and in 2010 when a branch rationalisation process began, RBS made a promise not to close bank branches where it was the last bank in any town. 44 ‘last banks in town’ were subsequently closed in 2014 by RBS, despite majority control being in Government hands at the time.

My view is that HSBC will simply be looking at the economics. Each branch provides a contribution to the Group. Some will be unprofitable, some will be profitable. Those not pulling their way will be the first to go, last bank in town or not. With the £700m-£1m Government Bank Levy in prospect, HSBC has no reason to mollify Government. Unprofitable branches are likely to be in provincial suburbs or in rural towns.

The next victims are likely to be those where the premises are either costly to rent, or where owned, in places where significant cash can be realised. These branches will tend to be in the South East of England. Finally, in common with all banks, HSBC will doubtless have some ‘problem branches’ associated with poor management. It’s an easy decision to close these and solve the problem permanently rather than spend time and money and talented management resources trying to rebuild reputations.

At the end of the day, HSBC is a commercial entity, it will take the opportunity to cut out the low performers, and although it says that staff losses will be by attrition, those in branch closures not willing to travel may well simply leave.

A reduction in headcount of 8,000 staff - probably at the more experienced end if past bank staff cuts are anything to go by – and the associated savings of not having to run 120 expensive high street branches – will go a long way to funding the £700m Bank Levy imposed by the Government, if not pretty much restoring its financial position pre-levy.

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