One of South Africa’s biggest banks shrinking branches across South Africa

Nedbank will continue shrinking the size of its branches across South Africa, as it looks to maintain its significant physical footprint in a more efficient manner. 

Coupled with this is the bank’s efforts to reduce its office space by consolidating regional offices and adopting a hybrid work model. 

The bank aims to achieve a reduction in physical footprint without compromising client service by leveraging partnership with retailers, such as Boxer, and improving the capabilities of its existing points of presence. 

CFO Michael Davis told Daily Investor after the bank’s interim results that Nedbank continuously reviews its physical presence to enhance its offering and make it more efficient. 

“In South Africa, as a bank, you will always need a physical footprint that your clients can engage with, particularly if you want to offer a complete range of financial services,” Davis said. 

He also said that despite the rise in digital transactions, a significant number of transactions still take place within a branch or at ATMs. 

“Having said that, what you have seen Nedbank do is retain its points of presence, but reduce the size of its footprint.” 

“If you go back over the years, you will see that every branch and every point of presence was roughly the same size and offered the same services,” Davis said. 

“What you will see now is that through our relationship with Boxer and the rationalisation of certain points of presence, we still exist in the same places, but the type of facility has changed.” 

Davis explained that this comes with different offerings at different facilities and branches, depending on location and customer demand.

“If we have a point of presence with a retailer like Boxer, it is manned by Nedbank staff, but it is very simple in terms of its value offering or proposition.”

“On the other hand, if you go into Sandton City, you will see a huge branch offering everything from transactional banking to stockbroking, asset management, lending, and deposit-taking.” 

Davis expects banks to continue to rationalise their physical presence to reduce costs and make them more efficient in serving clients. 

Coupled with this is a drive from the bank to improve the capabilities of its ATMs, to enable them to perform more functions that a traditional branch would and serve more clients. 

“So, I think big commercial banks in South Africa will continue to require physical points of presence, but these will evolve to become more efficient by leveraging technology.” 

This will ultimately enable banks to reduce the costs of operating these physical points of presence, taking costs out of occupation, staffing, and real estate. 

Offices not being spared

Nedbank’s real estate rationalisation also extends to its office space, with the bank reducing headcount and embracing a hybrid working model. 

Davis explained that the bank is looking to fundamentally change its staffing structure to look more like a diamond than a triangle. 

Traditionally, banks’ talent is shaped like a triangle, with many low-level management filling the bottom ranks and very few individuals at the higher echelons. 

Nedbank is looking to remove some of the jobs at the lower end of the pyramid and invest heavily in acquiring skilled employees to fill out its middle ranks. 

“If you think of it as a pyramid with top management through to low-level management, that is now shifting towards a diamond shape,” Davis said. 

“This means your staff complement is a lot thicker in the middle, which comes at a higher cost. Although there may be a decline in staff numbers, they may come at a higher cost as they are higher-skilled and employed in elevated positions.” 

This organisational restructuring has been combined with the adoption of a hybrid working model, reducing Nedbank’s need for some of its office space. 

“If I can speak to Nedbank, we have now gotten to an optimal hybrid work construct, with regard to how many people work in the office at various days during the week,” Davis said. 

This, combined with consolidation, has rendered some of its office space obsolete, including buildings in Sandton and Durban. 

“If you drive down to our 105 West regional office, you will see a big ‘for sale’ sign there. There is also a property in Kingsmead, Durba,n that we are looking to sell.”

“So, there is a bit to do on the corporate real estate side. We have done a lot, but I think there are still some costs to take out as it relates to the final rationalisation of our regional head office construct,” Davis said.