What Do Societe Generale's Plans to Shutter Hundreds of Branches Mean to US Banks?

The management of huge French bank Societe Generale has decided to steady the company’s shaky financial situation via cost cuts and an exit from what it deems non-core businesses. As part of the plan, it will fire hundreds of employees and shutter 300 of its 2,000 branches in France. Worth noting is that U.S. banks have been under similar pressure to lower expenses in their retail divisions, and chopping branches has been a critical part of the tactics used to reduce these costs.

Executives at Societe Generale announced:

The Group is the third(1) largest retail bank in France, primarily through its two traditional networks, Societe Generale and Crédit du Nord, which are increasingly focused on sophisticated and valueadded services for corporate, professional, mass affluent and wealthy clients. Its third brand, Boursorama is the online banking leader in France. The 2020 strategic plan marks a decisive step in the adaptation of the traditional retail banking model:

• Further rationalisation of the branch network: from 2000 to 1700 branches (2017-2020)
• Fewer back office centres: from 20 to 14 (2017-2020)
• Automation of 80% of front-to-back processes by 2020

While fully taking into consideration the need for proper social dialogue, this plan could lead to an
additional headcount reduction of up to 900 employees, in additional to the 2,550 already announced
at the beginning of 2016, taking the total number to 3,450 by 2020. In 2020, the bank will be in a
position to prepare the next phase of the transformation of its model.

By a recent count, the three largest retail banks in America have thousands of branches. Wells Fargo & Co. (NYSE: WFC) has over 6,000, JPMorgan Chase & Co. (NYSE: JPM) has 5,300 and Bank of America Corp. (NYSE: BAC) has 4,600. These companies have already begun to pare their numbers of locations. Most analysts expect that to continue.

There a several reasons U.S. banks believe that they can continue the downsizing of their locations. First is that customers can do business at ATMs or at bank websites. This includes, in some cases, the ability to take out loans for autos and credit card overdrafts. As more people turn away from traditional retail banking, large banks find that they do not lose customers who want to do business face to face. If anything, many of these customers would rather do business on their PCs or smartphones.

Societe Generale is in financial trouble that is not matched by large U.S. banks. However, that does not mean American banks won’t employ some of the French company’s tactics.