Banks Expected To Cut Down On Office Space And Bank Branches

(Image: Wikimapia)

As a result of the Covid-19 pandemic and the permanent changes it has brought to the financial sphere, banks around the world are closing down their branches and reducing their usage of office space. In Malaysia, banks and industry observers have told Star BizWeek that they expect to see a similar trend take place soon, if not already.

According to Sunway University professor of economics Yeah Kim Leng, it is inevitable that banks will close down its “uneconomic” branches, downsize physical asset holdings, and migrate towards more online banking services. At the same time, the plethora of digital banking services available especially in the post-Covid environment is reducing the need for bank branches and face-to-face transactions.

Institute for Democracy and Economic Affairs analyst Carmelo Ferlito observed that e-banking is a system that is very appealing to consumers as it is fast and requires no queues and parking. “Somehow, Covid-19 has accelerated or boosted this process and we may observe it continuing into the future,” he said, highlighting that the trend of financial institutions cutting down their physical presence was initiated 15 years ago.

(Image: The Malaysian Reserve)

MIDF Research head Imran Yusof also agreed that banks have been consolidating their branch networks even before the Covid-19 pandemic. While the pandemic has sped up this process, he opined that it is too early to speculate whether this trend will become the new norm. Banks are likely to still need a branch network to continue on – the question for each bank is what the optimum size of that network will be.

“Meanwhile, on office space, in general, we believe that we need to be out of the pandemic before we can make any meaningful assumptions on whether banks here will cut down on this,” Imran said. “While the pandemic has shown that it is possible to work remotely, banks may reverse their decisions as they might deem it necessary to have their workforce in the office.”

AMMB Holdings Berhad group CEO Datuk Sulaiman Mohd Tahir revealed that the banking group had already reduced actual space by about 21% over the last for years, with 40% of its workforce currently working from home. “Efficiency is the order of the day for any banking group as the entire sector is changing drastically and in order to be more efficient and improve our advantage in the sector, embracing digitalisation and improving efficiency is no longer a trend or a choice but our new reality,” he said.

(Image: Getty Images)

OCBC Bank (M) Bhd CEO Datuk Ong Eng Bin said that OCBC Malaysia is “certainly rethinking how we might optimise the use of our office space” given the positive response to work-from-home options. “But there is still some way to go before we put those plans into action. At this stage, it is clear that organisations in general will indeed need less space than they did, pre-pandemic,” he said.

While OCBC Malaysia does see less reliance on physical bank branches due to the rise of digital banking, Ong pointed out some differences between the bank’s operations in Singapore and here in Malaysia. Earlier last week, OCBC Singapore said that it would review the current need for office space and possibly reduce the number of its branches too. Unlike OCBC’s operations at group level in Singapore, the banking group in Malaysia does not have a large number of branches, with only 42 spread across Malaysia. “So we don’t anticipate closing branches the way it might be done in Singapore where we operate as a large local bank that is ubiquitous,” he said.

Besides OCBC Singapore, across the causeway DBS Bank is also reported to be vacating a number of the floors it occupies at Marina Bay Financial Centre. Meanwhile, Standard Chartered has said that it will shut down half of its branches and slash its office space worldwide by a third in order to save costs and adjust to the reduced need for physical spaces.

(Source: The Star)

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