Summary

• The Co-operative Bank announced to cut 350 jobs and 18 branches as more customers shifted towards online banking during the coronavirus pandemic.

• The impacted staff would include those from the closed branches as well as the lender’s head office and middle management roles.

• The 18 branches have been selected based on analysis of the footfall at each branch

The growing use of online banking among a large section of the bank customers has significantly reduced the footfall of customers to the bank branches. This reduction in footfall has been further accelerated due to the coronavirus-led crisis, with many customers increasing the use of digital banking services. This has resulted in the banks to close many of their branches and cut jobs in order to become a leaner enterprise, cut cost and generate profits. On 25 August 2020, Britain’s Co-operative Bank plc announced closure of its 18 branches across the UK and axe approximately 350 jobs. These jobs would include the roles of staff at the affected branches as well as focus on the middle management positions and bank’s head office employees. The lending institution informed that it has already talked with the affected members and is currently consulting with colleagues and its trades union on the proposed job cuts. The bank said that it would redeploy the employees to other roles wherever possible.

Mentioning that the bank’s staff have been dedicated and committed to the needs of its customers in the past few months, Bester regretted to announce the job cuts. He assured that the bank would take all necessary steps to support the affected colleagues through the process with fairness and respect.

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Expressing displeasure on The Co-operative Bank’s proposal regarding job losses and bank branch closures, Unite, the UK and Ireland’s largest union, said that though job losses are never welcome, the recent announcement by the bank would hurt specifically as the bank’s workforce have suffered over the last decade due to the repeated restructuring exercises. The union said it would strengthen its efforts to push the lender to bring required strategies that could protect as many jobs as possible and avoid any compulsory redundancies.

The Co-operative Bank’s Financial Health

The Co-operative Bank was making losses when it entered the crisis period and struggled to improve its finances since its near-collapse and rescue by a group of hedge funds from the United States (US) in 2017. In the firsts six months of 2017, the bank registered an increased statutory pre-tax loss of around £45 million as compared to approximately £38.5 million half-year loss in 2016.

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The closure of branches at the bank is likely to be completed by 1 December 2020. The 18 branches have been selected based on a vigilant monitoring and analysis of the footfall at each branch over a one year period between January 2019 and December 2019. It is to be noted that the duration chosen by the bank to count the footfall is of pre coronavirus-induced lockdown. The Co-operative Bank is committed to keep offering the high-quality services that are crucial for its various customers. The lending institution informed that it is sending communication to the affected customers and offering details regarding the alternative options that they could avail of. Some of these options include the post-office counter services apart from telephone, online, and mobile banking.

Talking about branch closures, Bester highlighted that The Co-operative Bank is acting in response to the trend wherein a large number of its customers are banking online. Over some time, the bank has observed lower levels of transactions in its branches, with customers showing increased inclination towards digital banking across the banking sector.

The bank is in a resilient position now as it has succeeded in making considerable progress in past few years. On 30 July the bank released its half-yearly performance for the period ending 30 June 2020. Despite having underlying losses (statutory loss before tax: £44.6 million), the bank showed resilience with growing numbers of customers and balances. The CET ratio stood strong at 18.2 per cent and the bank strengthened its digital infrastructure.

The lender would concentrate on maintaining this as it would continue its efforts to assist the customers in the ongoing fight against the coronavirus crisis. It is to be noted that earlier in 2020, lawyers at The Co-operative Bank, who are usually positioned at its head office filled the frontline roles in the branches to assist the bank to meet the rising demand from customers and increase in staff absences.

The banking industry scenario in the UK

The move from The Co-operative Bank follows after other leading banks including Natwest, Barclays, and TSB recently announced fresh staff cuts. NatWest Group plc (LON: NWG) is cutting around 550 jobs across its bank branches and is shutting one of its major offices at London. During mid-August 2020, TSB (Trustee Savings Bank) Bank plc announced slashing of around 1000 jobs in addition to phasing out the role of cashiers. HSBC Bank has planned the closure of 28 of its branches later in 2020. Another major lender, the Lloyds Banking Group Plc (LON: LLOY) plans to close 56 branches. Virgin Money UK plc has renewed plans to either shut or merge 52 of its bank branches. Later in 2020, Barclays plc (LON: BARC) would lock two of its branches in London. As compared to pre-coronavirus pandemic times, footfall at its branches declined about 60 per cent, informed Barclays. According to consumer group Which?, approximately 55 bank branches put their shutters down every month in the past five years. This has left many localities with no bank branches.

Conclusion

The coronavirus pandemic has brought an increased emphasis on online banking, making the banks to re-structure their growth plans and implement cost cutting measures. In addition to the coronavirus-led economic crisis that has impacted the business of the banks, there is growing uncertainty on how long it would take to revive the economy with falling gross domestic product (GDP) numbers gripping the UK economy under recession. The social distancing norms and increased fears of catching an infection in close door environments have restricted the customers to visit the bank branches and shift towards online banking instead. Many experts agree that these reasons have raised the fear that coronavirus pandemic could be used as a reason for the banks to aggressively shut their branches. The growing fears that the coronavirus pandemic would trigger the end of bank branches come amid reports of anger from many customers who visited the branches during the pandemic. Customer voiced their concerns on banks regarding reducing their working hours. Online banking is not a new phenomenon and these times of crisis call for a greater balance between embracing the benefits of providing digital services and human interaction to sustain and grow the business. Many industry insiders suggest that banks need to focus on providing training to their employees to make best usage of technology to grow the business, support their customers, and make profits.