[Asia Economy Reporter Park Byung-hee] The Wall Street Journal reported on the 14th (local time) that European banks are planning large-scale layoffs and branch closures, citing the COVID-19 pandemic as the reason.
As non-face-to-face contact becomes the norm, banks are expected to use the strengthening of online services as a justification to reduce offline costs. According to Ireland's AIB Group, the number of people visiting banks has decreased by about 30% due to the pandemic.
European banks are considered less competitive compared to American banks. Having experienced the 2008 global financial crisis and the subsequent European debt crisis, they failed to improve their structure compared to U.S. banks. As a result, they are now facing the challenge of enduring the COVID-19 crisis while still carrying a large amount of non-performing debt accumulated during the European debt crisis a decade ago.
Andrea Enria, head of the banking supervision sector at the European Central Bank (ECB), said, "The pandemic is acting as a catalyst for European banks to urgently address their identified weaknesses."
Accordingly, forecasts suggest that large-scale layoffs and branch closures will continue over the next several years. Consulting firm Kearney predicted that about a quarter of the 160,500 European bank branches will close within three years.
Germany's second-largest bank, Commerzbank, announced on the 11th that it plans to reduce one-third of its domestic staff and close about half of its domestic branches. Cerberus Capital Management, a U.S. private equity firm and the second-largest shareholder of Commerzbank, is demanding strong cost reductions from the bank. Since investing in Commerzbank in 2017, Cerberus has recorded accounting losses exceeding 300 million euros.
Spain's CaixaBank acquired Bankia last year. CaixaBank stated that the merger could reduce annual costs by 770 million euros. Market experts expect CaixaBank to close about half of its 6,300 branches following the merger.
The top five banks in Spain have been continuously reducing costs through layoffs and branch closures for several years, closing 8% of all branches last year. Spain ranks among the countries with the highest number of commercial bank branches per capita in the Eurozone. According to International Monetary Fund (IMF) statistics, as of 2019, Spain had 49 branches per 100,000 people, significantly more than the United States' 30 branches per 100,000 people.
Italy's Intesa Sanpaolo also merged with a smaller bank last year, resulting in 10,000 layoffs and the closure of several hundred branches. However, Intesa Sanpaolo still maintains over 4,000 branches, a number comparable to the branch networks of U.S. banks such as Bank of America (BOA) and JPMorgan Chase.
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