Time New York: Sat 20 Oct 08:30 am  |  Save 15% on H&R Block Online


RBS to Undertake Another Branch Closure Drive Next Year


The Royal Bank of Scotland plc RBS recently announced plans to close about 259 branches in order to accommodate changing customer preferences to digitization. The state-owned lender’s move has attracted opposition from Britain’s labor union, Unite.

The era of digitization has forced banks to shut down their branches in which people hardly turn up and thus utilize the costs saved in expansion of core businesses.

The bank will be closing 62 Royal Bank of Scotland branches and 197 NatWest branches by mid-2018, which would take away jobs of about 680 employees.

In March 2017, the bank had shut down 128 branches in NatWest and 30 units in the United Kingdom based on changes in customers’ choices and usage patterns throughout the bank’s network. The move had resulted in more than 1000 job cuts.

Reasons Behind Branch Closure

Per an RBS spokesperson, customers are increasingly preferring to avail banking services either through net banking or mobiles. According to their data, since 2014, physical appearance of customers at branches has fallen 40% while mobile transactions have risen 73%.

The bank also said that more than five million customers are availing banking services through mobile apps.

Further, since its bailout in 2008, the bank has been reporting losses. Therefore, with a view to improve its financials, Royal Bank of Scotland considers this a justified move, which would help reduce expenses.

Promises Made

Acknowledging its customers needs of digital banking, Royal Bank of Scotland disclosed plans to strengthen its online offerings. It stated some alternatives for “traditional bricks and mortar branches” — Community Bankers, Mobile Bank on Wheels, and Post Offices. The bank is also planning to invest in some of its popular branches.

Further, taking into account the fact that not all people would be comfortable with digital banking, the bank has introduced TechXperts. It consists of specialists who would be providing training and support to customers regarding the use of digital services. Already there is a minimum of one TechXpert in every branch across the United Kingdom.

Negative Reaction

The bank, which is still 71% owned by the state government, has received criticism from Unite, which described the bank as "morally bankrupt.”

Rob MacGregor, Unite’s national officer, showed concerns over thousands of staffs losing jobs. He said, “Serious questions need to be asked about whether these closures mark the end of branch network banking.”

Impact of Digitization on Other Banks

Last week, Lloyds Banking Group plc LYG revealed plans to close 49 branches, in sync with the changing consumer preferences and as part of its efforts to move toward digitization. The move will result in nearly 100 job cuts.

In August 2017, Barclays BCS disclosed plans to close around 54 branches by the end of 2017 in an effort to cut costs. The bank cut back its network as more and more customers started turning toward mobile banking.

In order to focus on digital services, Citigroup C shut down three of its four branches in London, this year. The bank mentioned that wealth management is best suited to its client base. Thus, it felt the need to close other branches as they do not match its strategy.

Our Viewpoint

Though Royal Bank of Scotland hopes to deliver profit in full-year 2017, a lot depends on when it reaches a settlement with the regulators over misuse of toxic mortgage backed securities in the United States. These restructuring moves might lend some support to the bank.

Last month, the lender had launched robo-advisory services through its NatWest Invest platform with a view to attract young investors. This is a new digital and low-cost option aimed at helping customers who prefer managing their investments themselves. Such investments encourage us about the bank’s prospects.

Shares of Royal Bank of Scotland have gained 34.3% year to date, outperforming the industry’s rally of 18.5%.

Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks’ Best Private Investment Ideas

While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.

Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.

Click here for Zacks' private trades >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

To read this article on Zacks.com click here.

Zacks Investment Research
<-- You can share this post with your network,
or give us your opinion and leave a comment.
Be sure to check our RSS feeds for updates.