National push heralds banking's branch revival, says Alex Brummer
The Future of Branch Banking in the UK
Debbie Crosbie, the chief executive of Nationwide, is standing out from the crowd with her decision to extend the moratorium on branch closures until 2030. This move contrasts sharply with the trend among the Big Four banks, which often claim that physical branches are obsolete and that customers prefer online banking. According to Which? data, over 6,731 branches will have been closed by the end of next year.
On my local high street, I’ve noticed how former bank branches have been repurposed. The Barclays branch is now a Gail’s bakery, the NatWest has become a pilates studio, and the HSBC building is another upscale coffee shop. This raises the question: are UK banks missing an opportunity?
In Washington DC, I observed that branch banking is still thriving, even after the financial crisis led to the collapse of local lender Riggs. This is not a coincidence; it reflects a broader trend. JP Morgan, for instance, has opened 1,000 new branches in the US over the last seven years, expanding its retail network to 5,000 locations. It's not alone—Bank of America and Wells Fargo are also slowing or halting their branch closures.
Wells Fargo, with 4,135 branches, is expanding into Washington and targeting New York City, Nashville, and fast-growing Texas, a hub for tech entrepreneurs like Elon Musk. Bank of America plans to open 150 new outlets, while Pittsburgh-based PNC Financial Services is investing $2 billion in 300 new branches and renovating its existing locations.
It's important to note that the American banking system differs significantly from the UK’s. Larger money center banks in the US are competing with local and regional rivals for customer business. In this context, branch banking offers a competitive edge against fintech startups. It is particularly effective in attracting consumer deposits.
JP Morgan recently reported that its “consumer and community” segment delivered a 35% return on equity in the last month. For branches to be profitable, they need to offer competitive returns on savings and superior customer service—areas where British banks have struggled. American branches also provide wealth management advice and execution, a space that British banks have largely ceded due to strict regulations, allowing financial advisers and platforms like Hargreaves Lansdown and AJ Bell to take the lead.
Santander has taken a different approach, transforming part of its Kensington branch into a workspace for PC users, complete with a coffee shop. This innovative strategy highlights the potential for reimagining traditional banking spaces.
A Shift in Focus
The UK’s trend of closing branches and cutting costs reflects a growing disconnect between bank executives and their customers, as well as smaller businesses. This approach is seen as short-sighted and out of touch.
BAE Systems and Geopolitical Opportunities
While Rachel Reeves discusses “securonomics,” it is the Germans and Americans who are driving growth at BAE Systems. Berlin appears to have the budget flexibility to meet NATO defense spending targets, despite Britain’s challenges in securing funding. There isn’t much left in the overseas aid budget to tap into.
BAE Systems is benefiting from the post-Ukraine landscape, supplying Typhoons to Turkey, anti-drone missile defenses to the Pentagon, and playing a key role in constructing Donald Trump’s “Golden Dome” defense systems. Its shares have risen by 56% this year. While this isn’t yet a full-scale turnaround like Rolls-Royce, geopolitical factors and BAE’s unique position at the Pentagon suggest promising prospects.
Experian and the Power of Data
When Great Universal Stores split nearly two decades ago, it created three independent companies, including Burberry and Argos, now part of Sainsbury’s. The least understood entity was Experian, the credit checking group. Recent results show a 9% growth in services provided to consumers, along with strong performance in mortgage data and analytics for businesses.
Despite a market value of £31 billion and first-half profits of £744 million, Experian hasn’t benefited from the recent FTSE 100 surge. However, deeper adoption of AI could change this dynamic.
