EU Banks Risk Losing Customer Focus as They Reorganize

Europe’s retail banking sector is battling weak consumer sentiment and the threat of loan defaults. To curb losses and adapt to a difficult consumer credit environment, some European banks have opted to restructure.

Most recently, BNP Paribas is reported to be considering different options for a major overhaul of its consumer finance unit.

The news comes as European banks have been dialing back their lending to businesses and consumers for the first time in nine years following interest rate hikes and a possible eurozone recession.

Should the French bank go ahead with restructuring, it could potentially sell off parts of the business in an effort to cut costs and refocus on more profitable departments and geographies. BNP Paribas has already agreed to sell its Bulgarian personal finance business to Postbank, the Bulgarian division of Eurobank.

Going forward, further sales or cutting services could be on the cards.

In another ongoing bank restructuring being carried out by Societe Generale Group, keeping branches open and maintaining those all-important customer touchpoints has been one of the major priorities of the recently formalized merger of Societe Generale and Crédit du Nord Group.

More than two years in the making, the newly formed retail bank, known as SG, was officially launched on Jan. 1 in a major consolidation of the group’s retail banking operations.

As Societe Generale stated in a press release, the combination of the two banks’ retail assets will give customers in France access to a larger branch network than they had when the businesses were operated separately.

“All customers will benefit from an increased number of points of sale, multiplied by more than two for customers from Crédit du Nord Group and increased by 15% for Societe Generale customers,” the release said.

That network of regional French banks includes the oldest existing bank in France, Banque Courtois, which was founded in 1760 and is part of Crédit du Nord Group, which has deep roots in the country’s retail banking sector. Prior to being acquired by Societe Generale in 2000, the financial institution (FI) was owned for several decades by Paribas.

Consolidating Branch Networks

While maintaining an important presence in the French banking landscape and relied on by many consumers and small businesses, such local and regional banks are at odds with today’s global banking system, which is dominated by a small number of multinational giants.

This can be traced back to the creation of the Crédit du Nord Group through the merger and alliance of various smaller local banks. And in essence, its recent integration into the SG brand is only the latest chapter in a 100-year-long story of consolidation.

But while there is a strong business case for pooling resources and streamlining overly complex structures, the challenge for banks is to do so in a way that doesn’t sacrifice service quality.

As the new SG bank begins reorganizing the respective branch networks of its previously separate components, it remains to be seen if the FI can maintain adequate service levels and live up to its commitment of multiplying, rather than reducing, the amount of branches customers can use.

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