Germany’s Commerzbank is closing more than 340 branches and slashing one-third of its staff to cut costs, while it invests heavily in IT as part of its digital transformation. About 10,000 job cuts are planned.
“As part of a wide-ranging digitisation, the bank will substantially reduce its branch network from the current level of 790 to 450,” said Commerzbank.
The cuts will reduce costs by €1.4bn by 2024 as it focuses on digitising its business model. The German full-service bank will invest €1.7bn into IT over the next four years to digitise and automate.
Frankfurt-based Peter Schumacher, CEO of management consultancy The Value Leadership Group, said an incredible pace of change in banking has triggered the delayed deep organisational restructuring that Commerzbank is undertaking.
“While they are cutting branches, this on its own won’t bring about a fundamental improvement in the business, business model, value proposition – their competitive advantage,” he said. “Rather, it just buys them time. Downsizing the bank won’t, on its own, make the bank better.”
Schumacher said current CEO Manfred Knof should be given credit for starting the restructuring to cut costs and bring the branch network into line with reality, after the previous leadership was guilty of “sleeping at the wheel”.
Fintech entrepreneur Matthias Kroener, who set up Fidor, one of the early digital challenger banks, said: “Under the leadership of former CEO Martin Zielke, Commerzbank lost a lot of valuable time to become fit for the future. He never understood what digitisation really means.
“He once visited us at Fidor. I explained to him our value proposition and why digital is so super-relevant to us. He had one question: how can I use that in my branches? I ended the conversation because this showed he didn’t understand.”
Kroener said that only Commerzbank’s online bank, Comdirect, is an asset.
Traditional banks everywhere face challenges in the face of increased competition from specialist digital banks. Challenger banks have the advantage of a low cost base as a result of their automation of digital services.
Traditional banks are balancing existing models, which have been used to serve customers for years, with new digital banking services. This is seeing cuts in costs through branch closures, job cuts and even the closure of offices, while their investment in technology increases.
Thousands of bank branches have been closed across Europe in the last few years and a recent bout of closures has been announced.
Earlier this month, HSBC said it will close a further 82 branches as part of its strategy to move customers to digital channels.
The previous month, Ireland’s Allied Irish Bank (AIB) and France’s Societe Generale (SocGen) also announced branch closures.
AIB said it was cutting its workforce by 1,500, merging branches and vacating premises in an attempt to cut costs following a review, influenced by the acceleration of digital banking and home working during the Covid-19 pandemic.
SocGen said it was merging two of its French retail brands to cut costs and enable it to focus on a single IT system. The move to merge SocGen’s retail business with its Credit du Nord subsidiary will see it close 600 of its 2,100 branches as part of a plan to take €450m off its costs by 2025.