By Simon Bond

We have long made the point that it is better to be a bank shareholder rather than a customer.

Every day I get asked about future profit growth for the banks and how they will deliver, actually I have been asked that same question every day since October 1987.

Well it's like this, from here on they will continue to cut costs, and actually accelerate this process, slim down footprints and close branches. And fire people. I have been studying a recent book published, cover shot below.



The publication is essentially a series of interviews with the top brass of banks around the globe, and also interviews with the likes of Google and other companies that see room to squeeze in and get a slice of the action.

Some of the more enlightening statements are below. 

  • Credit decisioning is going to go through a rapid change in the next decade as most of these decisions become real-time—no longer based on some application form you fill out sitting in a branch, but triggered contextually and based on a risk methodology built more from consumer behavior than historical default.  
  • What we are seeing is a big shift from being a supply-driven business to being a branded, marketing-driven business. Fundamentally, the question whether banks can win or lose that battle is going to be largely down to the level of experience that they can deliver, and whether they can keep up with the technological advancements of their peers and other parts of the industry. So, I would say that you’re going to end up with an industry where you’ve got two or three mega-banks that have strong, strong brands, and a lot fewer branches (maybe half as many) with a lot more remote transaction capabilities and extremely strong online and mobile capabilities. 
  • In the US bigger banks like BofA have also tactically reduced the average size of their key branches. In urban centers, BofA has been downsizing its branches by more than 50 percent, down from around 6,000 square feet to around 2,200 square feet, with their so-called express branches in locations like New York City.