Last branch standing? Lloyds is latest bank to let customers down

Outlook There are two very conflicting views about Lloyds Banking Group’s plans to close 200 branches or so and axe 9,000 jobs.

The first, on display in the media and among the unions, is that it is an outrage with the big bad bank sticking it to its staff and to the communities it serves. Again.

The second, more commonly heard within the financial community, poses a question: “Is that it? Doesn’t Lloyds realise that people are deserting branch-based banking in their droves?”

Who, then, has the right of it?

The City is correct in one respect. Branch-based banking business is in a steep decline. It is an industry-wide trend, and some of Lloyds’ rivals are closing their outlets at a considerably faster pace than the black horse is managing.

The bank’s chief executive, Antonio Horta-Osorio, for example, pointed to figures showing transactions through his branches were down by a third over the last four years or so. In the cold light of day that’s the sort of figure that no business can afford to ignore. But has Lloyds gone far enough?

One reason Mr Horta-Osorio can afford to go slower than rivals is because Lloyds is already losing nearly 20 per cent of its network through the enforced sale of TSB.

The strategic rationale behind the slow pace of closures over and above that, however, is that Lloyds believes it can pick up business by being the last man standing.

Despite the industry’s best efforts there are still some transactions customers prefer to handle in-branch. Mortgages, for example, and other big-ticket items.

Moreover, branches not only provide a venue by which Lloyds could pick up more of this sort of business than its competitors. They also represent a visible presence. That could come in handy, particularly if and when the decline in branch-based transactions levels off.

It will take several years before we know whether it’s right about this, but the theory is sound. All of which begs a question: why has Lloyds inexplicably dropped the pledge not to close branches?

There are probably only a limited number of locations where this is the case, and the bank would have generated a bit of much-needed goodwill had it said it would keep them open.

Instead, it produced some typically mealy-mouthed excuses about the British Bankers’ Association’s method of classifying the last branch in town not really being fair.

And still the industry wonders why public attitudes towards it are so lousy.