MONTREAL — National Bank of Canada closed its in-person branches at a faster rate than any of the Big Six over the last year, as banks reevaluate the need for physical outposts amid changing consumer habits.

National Bank’s closures outpaced the average over the same period, with in-person branches in Canada falling nearly five per cent between Q4 2020 and Q4 2021, the most recent quarter for which data is available. On average, the Big Six closed just over one per cent of their Canadian branches in the last year—a total reduction of 63, according to their quarterly financial disclosures.

“National Bank has a stronger presence in Quebec and specific markets than most peers,” spokesperson Jean-François Cadieux said. “We were over-indexed in branch presence in urban markets, so we’ve been pruning our branch network in urban markets, while we ensured we maintained our branch share.”

Canadian banks have targeted their in-person branches as an area for cost-cutting as clients gravitate towards digital services. TD Bank, for example, on an earnings call in September, announced its intention to continue closing branches in the U.S. and replace some with smaller locations that are equipped with more technology.

As of late 2018, just over three-quarters of Canadians used digital channels to conduct most of their banking, according to a survey commissioned by the Canadian Bankers Association, a lobbying group. Just 12 per cent said going to an in-person branch was their most common way of banking.

But while globally, COVID-19 prompted more customers to use online banking services, the pandemic hasn’t resulted in as many branch closures in Canada as some analysts expected. Banks have been cutting branches at roughly the same rate as they were before the pandemic, waiting to see how it will affect consumers’ behaviour.

National Bank, the smallest of the Big Six, has fewer branches than any other major Canadian bank, making its reductions stand out more. As of Oct. 31, National Bank had 384 branches, compared with between 877 and 1,182 for the other five banks. 

Still, the rate of its cuts also led the pack on a longer time scale. Since 2017, National Bank has reduced its branch numbers by 45, a roughly 10.5 per cent decrease in its total numbers. That’s well above the rate of the bank that closed the second-most branches: TD, which shed 5.9 per cent of its total locations in the same timeframe. 

The Big Six bank that cut the fewest branches during that period was Scotiabank, which reported a reduction of just nine locations, a decrease of roughly 0.9 per cent. Overall, the Big Six cut about 4.9 per cent of their branches since 2017, or 280 in total.

The number of branch closures in Canada over that time period matches up with the rate in comparable markets like the U.S., where banks have closed roughly five per cent of their in-person locations, said Alex Johnson, fintech research director at banking consulting firm Cornerstone Advisors. “Both are mature banking markets where branches had an opportunity to proliferate before the arrival of digital banking,” Johnson said. “Thus, we have more branches today than we probably need.”

Branch closures can be driven by any number of factors, making it hard to draw conclusions from the data about what it might say about their different strategies, Johnson said. 

For example, National Bank might have had too many branches relative to its peers and been playing catch-up, while Scotiabank might have already closed the branches it wanted to prior to 2017, he said. Banks might have also added branches in other locations even as they closed some in others, changes that wouldn’t be reflected in the overall numbers.

Tom Wallis, a spokesperson for CIBC, said that while digital and in-person both play key roles in client relationships, consumers vastly prefer digital banking for everyday transactions. More than 90 per cent of routine transactions are now completed digitally, he said. 

One area for which banks have continued to rely on in-person services is in financial advice. Scotiabank spokesperson Kate Simandl said that throughout the pandemic, 98 per cent of its branches stayed open to provide advice and other services, even as the bank launched an online advice platform in September 2020 for customers who preferred to communicate digitally.

“Our branch network, and the thousands of financial advisors from coast to coast are a cornerstone of how we deliver advice to the millions of Canadians who rely on Scotiabank,” Simandl said. “We regularly open new branches, renovate existing ones, test new formats and consolidate branches into more effective locations.”

Despite the proliferation of digital banking services, some Canadians have felt the impact of the closures more acutely than others. In Beachburg, Ont., a small community near the Ottawa River, the announcement that Scotiabank was closing the town’s only bank branch sparked protests in early 2020 amid concerns that many residents would be left without easy access to banking services.

Scotiabank eventually agreed to leave an ATM in the town, but residents now have to drive almost 20 kilometres to neighbouring Cobden for in-person services—a hassle particularly for elderly residents, some of whom might not be able to drive, said Dave Mackay, a member of the Whitewater Region’s council. The branch’s closure also means less foot traffic for businesses in Beachburg, which benefited from people coming into town to visit the bank.

“It put a big hole in our village,” Mackay said. “A lot of young people use online banking, but for the older population, they find it very hard.”