The desert of banks with fewer and fewer branches

Will banks disappear from Italian territory? The numbers photograph a constantly increasing desertification. There were 20,2019 bank branches in 2023, 826 fewer than in 2022 (Data from the Observatory on banking desertification by First Cisl based on Bankitalia and Istat data). In 2008 there were 34,139. ​​It means that in 15 years over 14 thousand branches have closed. Today 42% of Italian municipalities have no branches, in 2015 they were 28.16%. A quarter of the national territory has been abandoned by the banks. What are the reasons? And will we become a country without banks present in cities and towns?

Once upon a time every bank wanted to be in the area with a prestigious headquarters. Growth has always been constant. We started with 15447 branches in 1988, 26255 in 1998 and 34139 in 2008, the peak. “In 2008/2009 the ascending phase of the banking presence in the area ended. The push was the introduction of the TUB (consolidated banking law) in 1994 which with liberalization accelerated competition and therefore being present in the territory. But then the Lehman Brothers crisis came and the world changed. The more stringent regulation has put pressure on the banks in terms of profitability and has triggered what we now see and call desertification”, explains Paolo Grignaschi, scientific director of the Fiba Foundation of Frist Cisl.

During the period of banking crises, cost reductions were sought in the name of stability, but then the concept came into play that, to be stable in the long term, credit institutions had to also be profitable. And the constant increase in profit margins expected and requested of banks (first to deal with the crisis period and then increased with the entry of purely financial shareholders into the shareholding composition) has led to a strong focus on cost reduction. So bank cuts. Then came the phenomenon of banking concentration, again a consequence of the Lehman Brothers crisis. From 1999 to 2022, the share controlled by the top five Italian groups out of the total exceeded 50% of the domestic market (+24.9%). In France we are at 46.4% and in Germany at 35%. Today in Italy we have 434 banks, compared to 1037 in 1993. And the more concentrated the system has become, the more the presence of banks in the area has decreased. If an institution merges with another, it closes nearby branches.

All this led to the current numbers. There are 3300 Italian municipalities without branches (134 have deserted in the last year alone). In 2023, 826 branches closed. There are over 4 million Italians who cannot access banking services in their municipality of residence. And there are over 6 million Italians who live in municipalities where there is only one branch left (24%). The most affected regions in 2023 are Marche (-6.7%), Abruzzo (-5.1%), Lombardy (-5.1%), Sicily (-5%) and Calabria (-4.2%). Fewer and fewer banks in the area, therefore, yet they are increasingly present in the lives of families and companies, providing and offering services rather than branches. “The bank is moving away from the territory, but its presence in our lives tends to be increasingly necessary. Now all payments are intermediated and the circulation of money increasingly passes through banks. We have more bank accounts than families. And the services that the bank can provide to citizens regardless of their presence in the area have increased. The importance of the bank in our lives is also fueled at a regulatory level (the law on the limitation of cash, electronic payments now for everything) and will increase with the arrival of the digital euro” explains Paolo Grignaschi

There is digital to compensate, many say. But the data shows that where there are fewer branches there is also less use of internet banking. The two aspects are complementary. Calabria, for example, is one of the regions where internet banking is used the least (26.8%) and is also one of those with the lowest number of branches per 100 thousand inhabitants (18). “The danger of exclusion, without banks in the area, is real. For the elderly population, but not only. The bank should return to being the social place it was, also in the interests of the banks themselves. Place where you come and find help on how to solve your financial problems, whether you are a student, a young worker, a worker, an adult close to retirement or an elderly person. But to do this you need to be in the area,” continues Grignaschi.

And then there is the question of work. The closure of the branches also means repercussions on the staff. It means redefining skills or cutting staff. In 2023 there was a decrease of 2 thousand employees compared to 2022 (Bank of Italy estimates).

Estimates say that in 2024 the number of branches will fall below 20,000. Are we a country destined to no longer have banks on our doorstep? “In the United States, even the big banks have started opening branches again. JP Morgan has started a repopulation of the branch network with the motto: “No American should be further than a certain number of minutes by car from one of our branches”. A change in strategy seems to be underway. Being local is good for society, but also for the banks. Here the downward trend will continue, but physical branches will not disappear completely. However, the physiognomy will certainly change. The local branches will be more similar to financial shops. Contact with the community will focus more on financial consultancy and social security and welfare issues”, concludes Grignaschi.