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Banks cutting branches as operations go online

Cashing a check may soon become a more complicated proposition. This is because major banks are growing leaner by the quarter, trimming branches as tellers and ATMs face an existential threat.

The closing of branches come as large banks implement cost-cutting measures that include removing thousands of employees from their payrolls.

Photo by Mike Mozart/ Flickr
Photo by Mike Mozart/ Flickr

Last October, Deutsche Bank, which is one of the largest foreign-based employers in New York City, announced that it would cut 26,000 jobs by 2018.

It is not clear if Deutsche Bank employees in New York would be included. Nonetheless, plans for the job cuts have solidified. The company recently announced plans to reduce its workforce in Brazil to half its size. The bank, which is listed in the New York Stock Exchange, also plans to close its operations in a cluster of 10 countries that include Argentina, Norway and Mexico.

Last week, the German bank reported a record loss of 6.8 billion euros, saying that its management board would not receive bonuses “as a matter of justice.”

Meanwhile, Bank of America, the second largest US bank by assets, cut over 10,000 jobs in 2015, with one-fifth of the total happening in the fourth quarter.

In an interview during the World Economic Forum, CEO Brian Moynihan said that more job cuts will come this year, albeit with a lower casualty rate compared to the previous year.

However, Bank of America’s pace of layoffs is sluggish compared to that of Citigroup, which announced 2,000 job cuts just for the first month of the year.

The layoffs coincided with the continuous reduction in the number of physical bank locations. In the US, Citigroup reduced its consumer banking footprint, limiting itself to six major cities: New York, San Francisco, Chicago, Washington, Los Angeles and Miami. During the fourth quarter of 2015, the company reduced its number of branches by four percent. Meanwhile, Bank of America shut down 129 branches, which amounts to a reduction of 2.6 percent.

Another reason for the shrinking number of locations for banks is the growing ubiquity of online banking.

For instance, Bank of America now has 32 million online users, 19 million of whom use the bank’s services through a mobile app. The number of online users represents more than half of the bank’s 47 million customers.

According to Faith Hope Consolo, the chairwoman of Douglas Elliman’s retail and leasing division, New York City is mostly immune to a bank exodus.

“I don’t think it’s disappearing. I think that there’s still a lot going on. We’re getting a lot of lease renewals and nobody’s just leaving their spot, because it’s a great location,” she said.

She attributed New York City’s strength to interest from foreign banks and smaller savings and loan firms. “Foreign banks are still looking to come into the market and also all the savings and loans. All the banks from the boroughs and outside of New York still want to have a position in this city.

“I just think that the landscape was overwhelmed before by all the big boys. And now we have a little reshuffling of the deck,” she said.

Patrick Breslin, the executive managing director of Colliers International, has a more pessimistic view on leasing activity involving banks. “I think the days of 5,000 and 6,000 square foot branches are probably going away. I think, with the large increase in people doing online banking, having 5,000 to 6,000 square foot retail branches is probably not a good thing,” he said.

The shrinking workforces of the world’s biggest financial institutions show that layoffs are not exclusive to companies trying to dodge financial ruin.

For the fourth quarter, Bank of America reported its highest earnings in a decade. The company posted a nine percent increase in net profit to $3.3 billion, or 28 cents per share compared to the year before. The figure exceeded the expectation of analysts. According to a report from Thomson Reuters, analysts expected net income at 26 cents per share.

Meanwhile, Citigroup posted a net income of $17.12 billion in the fourth quarter of 2015, the highest since 2006. The bank reported $1.06 in adjusted earnings per share, higher than the $1.05 estimated by analysts.

Nonetheless, experts expect leaner times ahead for the banking industry. Shares in Citigroup and Bank of America dropped after quarterly reports came out. Many banks have been hit by falling oil prices due to loans given to oil firms.

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