Montreal-based Laurentian Bank of Canada’s decision to eliminate a third of its branch network over the next 18 months is a clear signal that Canadian banks are committed to revamping their retail strategies in light of rapid technological change, evolving customer expectations, and challenging economic realities.
Laurentian, which calls its traditional bank-operating model “obsolete,” announced in late September that it would merge 50 of its branches and cut 300 positions, mainly through attrition, over the next year and a half. As of July 31, Laurentian reported having a total of 148 branches, almost all based in Quebec, and 3,651 employees.
“We view [Laurentian’s] branch rationalization as another step to making the bank’s retail operations more modern and efficient, with greater emphasis on digital channels,” wrote Joseph Ng, a Canadian banking analyst with London, U.K.-based Barclays PLC, in an equity research report to investors on the announcement.
Earlier this year, Laurentian said in an investor presentation outlining its long-term transformation and growth plans that it would be “taking advantage of expiring leases” to make decisions about its branch locations, and redesigning branch layouts “to foster customer proximity.”
The bank also announced that it would be modernizing its core banking system to enhance the customer experience and offer new mobile solutions, as well as cutting its suite of banking products from a total of 400, which includes legacy products, to just 25.
“We want to be recognized for the expertise of our advisors and our account managers, for the ease of doing business with us as well as having a simplified product range complemented by automated transaction services,” said François Desjardins, Laurentian’s president and CEO, in the announcement of the bank’s branch closings.
No other major domestic bank is undertaking such a large-scale consolidation of branches in the manner Laurentian has announced.
However, all the big Canadian banks are taking steps to move away from a transaction-focused retail branch approach and toward providing clients with innovative digital services and high-value advice via more customer-friendly, often smaller, physical locations.
This past summer, Toronto-based Bank of Nova Scotia rolled out two new branch formats in test pilot programs: Scotiabank Express, designed for quick, digital transactions, and Scotiabank Solutions, geared toward providing in-person advice along with access to digital tools and product engagement opportunities. The bank plans to roll out more such branches, and incorporate their best practices into its branch network.
Outside of Canada, many global banks have been consolidating branch networks, cutting staff and other costs, and investing in technology to meet evolving customer needs.
In early October, Netherlands-based ING Group announced it would be cutting 5,800 jobs, representing more than 10% of its global head count, over the next five years, for an annual savings of 900 million euros. About 800 million euros would be invested in digital technology initiatives over the next five years, the bank said. Other large global banks are making similar reorganizations.
Over the past few years, the Big Six banks have been announcing a wave of new partnerships with digital innovation hubs, as well as deals with financial technology (fintech) startups to look at ways of offering clients more digital services and products over a variety of platforms.
In the autumn of 2015, Toronto-based Canadian Imperial Bank of Commerce (CIBC) announced a major transformation toward digital banking, looking to help it achieve $600 million in savings. CIBC said it would consolidate its data warehouses to just one from 120, and reduce the number of key managers at each branch to one from two.
CIBC also announced partnerships with two fintech firms: one to launch an online platform for loans to small business, and the other to offer free remittance payments to clients.
Under Desjardins, who took over as CEO in November 2015, Laurentian is pursuing a transformation plan: the goal is to increase assets under administration to $70 billion by 2020, from $40 billion today. Part of that transformation involves digitizing transactional capabilities, using big data and analytics, and establishing strategic partnerships.
Laurentian will also put a greater emphasis on areas such as business lending and providing a wider variety of financial products and services to independent financial advisors, via its B2B Bank platform, while putting a lesser focus on its retail banking business.
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