National Bank of Canada is cutting branches and jobs to fund its digital transformation but won’t eliminate services as other financial institutions have done, its CEO said Wednesday.
“We have not stopped offering banking or transaction services in our branches, unlike some of our competitors,” Louis Vachon said in a conference call to discuss its strong third-quarter results.
Canada’s sixth-largest bank beat analyst expectations as its net income increased 8.4% to $518 million or $1.37 per share, lead by strong support from its personal and commercial, and wealth management operations along with cost controls.
Total revenue was up 7.6% at $1.68 billion.
Excluding one-time items, adjusted profits were $524 million or $1.39 per share, six cents per share above last year and $1.32 per share forecast by analysts.
Vachon’s comments came a day after Montreal-based rival Laurentian Bank said it would cease to offer certain types of counter services like depositing a cheque between now and the end of 2018.
The move would eliminate the equivalent of 150 full-time positions. That’s in addition to 300 job cuts announced last September as it reduces the number of branches to 100 from 150.
Other Canadian financial institutions, including Bank of Montreal, Bank of Nova Scotia, Toronto-Dominion Bank, Canadian Imperial Bank of Commerce and Desjardins Group, are also restructuring their operations in part to improve their digital operations.
Royal Bank of Canada said this week that its closure of 25 branches mainly in city centres across Canada over the past year is having a minimal impact on clients, as it increasingly shifts toward digital services.
National announced last fall that it plans to cut 900 positions over the next 12 months as it invests more in digital services. It is down to 21,526 employees while seven branches have been eliminated with some others being reduced in size.
“We are very sensitive that we are in the middle of a massive transformation,” Vachon told analysts.
“You do have to reduce the costs on the physical network so you can reinvest on the digital side to move where the clients want to go to.”
Analyst John Aiken of Barclays Capital said domestic operations are benefiting from National Bank’s exposure to the Quebec economy.
“We would expect the performance in its retail banking platform to be repeatable in the near term,” Aiken wrote in a report.
Vachon said the bank is helped by a resurgent provincial economy where unemployment has hit a 40-year-low, the employment rate among the working age population is at a historic high and affordable housing is keeping a lid on indebtedness.
Higher family incomes has made them more resilient, as was the case in 2009 when loan losses didn’t go up as much as in other parts of Canada, he said.
“Quebec is a no boom, no bust economic jurisdiction,” he added. “So we do not have explosive growth of four to 5%, but at the same time when things get rough we have less volatility to the downside.”