The closing of part of the bank branches that began in 2009, due to a combination of factors, should continue at a rate of 3% per year by 2020, according to the firm Sia Partners.
Retail banking: the distribution model is evolving
2009 was the year of the inflection point of the curve of the number of agencies in France, which had hitherto been steadily increasing. That year, Sia Partners published a study that broke the taboo of branch closures in retail banks: the strategy consulting firm then predicted the closure of 750 to 1,100 branches between 2009 and 2012.
Announcements of closures have followed since, and France has lost more than 1,100 agencies (-2.8% of the park) between 2008 and 2014, according to statistics from the European Central Bank (ECB). In 2013, the country fell below the threshold of 38,000 bank branches (La Banque Postale outlets included), and France will fall below the 37 000 branches in 2016, taking into account only announcements made by different networks.
Despite this, France retains the densest park in the European Union, with 570 agencies for 1 million inhabitants in 2014, according to the ECB. If we add the 58,640 ATMs identified in 2014, in constant increase (55,000 in 2009, 20,000 in 1994), the French have much to get in touch with their bank. In addition, 82% of Internet users regularly visit their bank’s website, and 30% of them access their accounts via their smartphones .
France is one of the only countries that has both such a density of agencies and as many online banking users. This paradox is reflected in an irremediable trend towards a decrease in agency attendance. The figures show a clear trend: 1 out of 2 customers visited the agency more than once a month in 2010, with less than 1 in 5 maintaining the pace in 2015.
PNB under pressure
This phenomenon is all the more noticeable since it is part of a context of declining network revenues and rising costs of settlements (cost of land, security, works and infrastructure, staff costs, etc.).
The net banking income (GNP) of retail banks in France is now under pressure. It began to contract in 2012, down 3.2% year-on-year. The pressure is regulatory first, with the impacts of the Macron law and MIFID2. Added to this is the pressure to cap commissions. This pressure is also competitive, between traditional banks but also with online banks that have managed to impose a free model, and with the new FinTech players who are in the process of disrupting virtually all banking activities (financial savings, payment, aggregators …), even if we do not know how to accurately measure today their future impacts on the market.
The profitability of retail banking began to decline in 2012, as the net interest margin, the main component of GNP, which had increased between 2007 and 2011 due to timely effects related to economic conditions and falling interest rates. . Since 2012, the net interest margin has been falling because the rates remain permanently low, and it will no longer be able to compensate for the lower commissions as it did previously. But these commissions will continue to be heavily under pressure because of the regulation in particular. The major French banks, however, managed to limit the damage by publishing 2015 results in a very slight increase (+1.5% for retail banking net banking income) compared to 2014.
The sluggish results of retail banks also reflect the difficulty of finding new sources of growth for this industry in France. The rise of web and mobile channels opens up new prospects for bank consumption and makes it possible to envisage new, more profitable distribution schemes, but it is also likely to accelerate the movement of branch closures.
Finally, the dispersion of the workforce in many agencies is costing more and more. On the one hand, the multiplicity of commercial offers requires efforts in terms of sales animation all the more important that deployments must be more responsive to the market and competition. On the other hand, the increased requirements in terms of controls and in particular of compliance require the reinforcement of the ad hoc devices closer to the operations.
All these factors militate for a reconfiguration of networks. The reduction of the number of agencies is triggered, it is a certainty. The question is how will this trend evolve?
One could very well imagine that the pace of closure is stabilizing or even that the number of agencies in France has reached a floor. The observation of what is happening among our European neighbors can shed light on the question. The number of agencies in France fell “only” by less than 5% between 2010 and 2014 (it had grown in 2008-2009 with the arrival on the market of La Banque Postale and its extensive network of contact points) . This figure should be compared with those of Germany (-11%), United Kingdom (-8%), Italy (-10%) and Belgium (-16%), over the same period .
Beyond these examples, we note that France has the lowest rate of decline compared to all European countries, even though they had density rates much lower than France. In 2010, France had 1,676 inhabitants for an agency when this density was 4,997 in the United Kingdom, 2,077 in Germany, 1,771 in Italy and 2,400 in Belgium.
This comparison with our European neighbors suggests that erosion is lower in France for essentially cultural and social reasons, and not because banking needs justify it.
A second element of answer can be sought in the analysis of the typology of closures and advertisements. Indeed, today, the decline comes mainly from large national networks: Societe Generale, BNP Paribas and LCL have led the number of closures since 2010 (the three banners totaling 350 closures between 2010 and 2014). At the same time, the mutualists have hardly touched their networks. The Banques populaires have even slightly increased the number of their establishments.
However, the three national networks mentioned above represent “only” 18% of the number of agencies in the territory. Thus, when Societe Generale announces the closure of 20% of its network by 2020, this represents about 400 agencies. If all mutual banks (Caisses d’Epargne, Banques Populaires, Crédit Agricole Regional Banks, Caisses de Crédit Mutuel) adopted the same trend, that would be almost 4,000 agencies that would disappear.
Of course, no announcement has been made in this regard and the leaders of mutual groups remain very discreet on the issue. They are hiding, quite rightly, behind the specific governance of these groups in which these choices depend on the general director or the president of the bank or the local bank, and not on the level of the group.
In addition, mutual banks have often stronger local holdings. These establishments are close to local customers and public authorities. This presence is an obvious commercial advantage but it is also a difficulty and a brake to network resizing. It is indeed difficult to close agencies in a municipality while you finance the community of communes, the General Council or the Regional Council. It is also a drag because political negotiations will slow down the implementation of this strategy.
However, even if the difficulties exist, the mutual banks will probably follow the movement. Certainly not with the same scale as Societe Generale or at the same pace, but the cost of running their small agencies and the constraints that fall on them are hardly compatible with the decline in attendance. Crédit Agricole Ile-de-France regional bank has thus begun its plan to close 50 branches, which still represents 15% of its network.
Among the mutualists, this will not be a desertification of the territory. But groupings of several small agencies, separated by only a few kilometers, will take place, to increase the opening hours, improve customer reception and the quality of service and expertise offered. This equation is not possible today with a network in which one-third of the agencies have three or fewer employees.
Another player of weight could change the deal. La Banque Postale, which bears a significant portion of the costs of the post office network, may well seek to concentrate in order to deploy expertise more easily, in a logic of lower costs made sensitive by the sluggish results. Today, La Banque Postale has more than 17,000 points of sale, ie almost double LCL, Société Générale and BNP Paribas combined. A reduction in the size of this bank would therefore also have a very significant impact on the total number of branches in France.
These elements seem to confirm the thesis according to which the reduction of the networks will continue. Once this fact is achieved, the question is what the scale and timing of the movement will be.
Yet branch closures are no longer considered today in terms of “geomarketing”. Network optimization requires rethinking the agency’s customer journey and integrating it into an omnichannel vision. The bank branch retains an essential place in the new distribution models, refocusing on the promotion of offers (commercial showcase) and on the provision of expertise in key moments of the relationship (real estate acquisition, investment savings). precaution, retirement, transmission, etc.).
This transition, which marks the renewal of the banking branch, is reflected in the redefinition of customer journeys and requires revisiting hospitality schemes to gain simplicity and efficiency.
In fact, the profession of reception officer tends to disappear in favor of a shared model of hospitality where all the staff of the agency is invested in the reception of the customers (There are less than 13 000 persons in charge reception today when they were more than 21,000 in 2009). All employees of the agency must be able to accommodate customers by covering all customer situations, regardless of the mode of contact (visit agency or remote contact via phone, email or videoconference).
34,000 branches in 2020
On the basis of all these findings, Sia Partners expects banks to accelerate the rate of closures without going beyond 3% closures per year overall. In this scenario, it would be around 3,000 points of sale that would be eliminated within 3 years, reducing their number between 34 and 35,000 branches in France by 2020.
Even in the strongest hypothesis, that is to say, imagining that France would count “more than” 34,000 agencies on its territory in 2020, it would have however only a decline of 12% per year. compared to 2010, far from the current trend of its European neighbors.
In addition, France would still offer an agency for about 1,800 inhabitants, still well below the European average (now 2,120 inhabitants per agency), while at the same time this average will continue to increase.
It is unlikely that the movement will take on a more violent form by 2020, given the social and cultural barriers already mentioned. The movement will probably continue gradually, even if it is difficult to set a timetable today and to predict the final level of the number of agencies in France without falling into science fiction.