Santander to close one in 10 Spanish branches to cut costs

Bloomberg

Banco Santander SA intends to close about 450 branches in Spain this year, more than one in 10, as the lender steers customers into digital banking to cut costs and bolster profitability.
“Spain’s financial sector is facing a period of major change,” Country Head Rami Aboukhair told employees in an internal memo announcing the closures. “The current economic context, greater regulatory requirements and the evolution of client behavior toward new technology make it necessary to accelerate our commercial transformation.”
As many as 450 branches will be involved in a “concentration” leading to larger offices, according to the memo whose contents were confirmed by a spokeswoman. That represents about 13 percent of Santander’s 3,467 branches in Spain. Most of the affected branches employ fewer than four people, the bank said.
The Comisiones Obreras union said on its website that Santander has informed it of plans to close between 425 and 450 branches this year. It expects further details, including on job cuts, when it meets with Santander officials next week.
Spanish banks are under pressure from low interest rates that have squeezed revenue from lending and from too much competition.
The country boasts more than 31,000 branches, even though more than 20 lenders have been disappeared since 2012.
In the “absence of consolidation, cost-cutting in Spain is one of the very few levers left” for banks to maintain or increase earnings, Stefan Nedialkov, a Citigroup Inc. analyst, said in a note to clients.
Santander is seeking to shave 3 billion euros ($3.4 billion) from expenses by the end of 2018, including by doubling the number of customers who interact with the bank by Internet, Chief Executive Officer Jose Antonio Alvarez said in a presentation in September.
The bank had 15 million so-called digital customers as of June last year, he said.
Santander’s Spanish business, which employs a whopping number of 24,000 employees, is the lender’s third-largest market and contributes remarkable amount of around 12 percent to the lender’s profit.
Net income in 2015 for the unit rose to 977 million euros from 827 million euros a year earlier on lower loan-loss provisions.Net interest income, the difference between what banks charge for loans and pay for deposits, fell 5.4 percent.
The stock fell 1.9 percent to 3.80 euros at 3:12 p.m. in Madrid trading. The shares were down 17 percent this year.