Location is key as banks reduce their branch networks – Jones Lang LaSalle
Lloyds Banking Group and the Co-operative Group have today announced that they have finally signed heads of terms on the purchase by the Co-op of more than 600 Lloyds bank branches. Lloyds was required to sell off these assets by European regulators, but retail banks in general are examining their branch portfolios and making changes to their networks thanks to advances in technology and political and economic trends, as well as regulatory requirements.
New research from Jones Lang LaSalle says that despite the “perfect storm” of regulatory and legal challenges currently taking place in the sector, there are still opportunities for change. Whereas in the past a trip to a branch was necessary to do any banking, advances in telephone, online and mobile banking in developed markets have sped up the process of change in the industry and mean that in the future retail banks will have much smaller branch networks. Political, economic and technological trends will lead to continued bank expansion in “frontier markets”, offsetting the search for greater efficiency in developed markets, JLL adds.
The firm says most developed markets in America and Europe are ‘overbanked’ and forecasts that as much as 50% of existing bank branches in developed markets will have become obsolete by 2020.
Robert Bonwell, CEO EMEA Retail at Jones Lang LaSalle, says retail banks have the greatest opportunity of all retail sectors to unlock the power of their property networks. New retail formats and technology give them options for driving the efficiency of their branch portfolios, entering new markets, or increasing competitive advantage.
While excess branch networks won’t disappear overnight, James Brown, head of EMEA retail research and consulting at JLL says that the trend will be one of a steady run-off as property leases expire. “The challenge in this truly multi-channel world will be for global retail banks to actively manage their existing property portfolio and then to identify the right locations to maintain a presence or take new space,” he says. “We will see far more emphasis on right place, right space and right price.”
