It is odd that in the fifth year of the crisis the banks – other than Anglo and Irish Nationwide – have not closed more outlets

HOW OFTEN do you go into a bank branch and how profitable is that business to your bank? Not a lot, is probably the answer to both.

This is one area that has preoccupied the mind of AIB’s recently-appointed chief executive David Duffy, a technophile who has lived in parts of the world where the most sought-after bank customers rarely if ever darken the doors of bank branches.

In fact, good business in certain overseas banks means encouraging customers never to return to a branch again and offering services they need at a lower cost to the bank in their homes or workplaces at any time. The growth in phone and online banking allows banks to deal with their customers more efficiently: this translates equally as more profitably.

A “fresh emphasis on technology and innovation” was one of seven objectives in Duffy’s strategy for AIB, as stated in a 24-page document issued to staff last Friday, aimed at turning around the fortunes of a bank that has cost the Irish public almost €21 billion.

Branches were always going to be next in the firing line as heavily loss-making banks try to repair their businesses by slashing costs.

It is odd that in the fifth year of the crisis the banks – other than the dying entities of Anglo Irish Bank and Irish Nationwide – have not closed more outlets, though the battle for deposits may partly explain this.

The branch networks of Bank of Ireland, AIB (including EBS) and Permanent TSB – the banks deemed by the Government to have a future – have remained largely intact. They have 700 outlets in the Republic – AIB has 270 and a further 84 through ESB. Bank of Ireland has 254, while Permanent TSB has 92.

Include Ulster Bank, Ireland’s third-largest bank, and the figure rises to 846 branches.

Excessive competition has not only squeezed profit margins but left the high street over-banked in terms of branches.

Many branches served as money counters for the booming mortgage trade but the fall in this lending frenzy from €40 billion to

€2 billion a year has rendered some branches too costly and surplus to requirements.

One bank recently surveyed the branch landscape, looking at the already-merged AIB and EBS and another State-controlled lender, Permanent TSB, and found that all three banks had outlets in 65 per cent of locations.

The foreign-owned banks have moved more aggressively to adjust to the new reality that the country had far too many branches.

Bank of Scotland (Ireland) has seen its 44 Halifax branches closed by Lloyds, its parent bank in the UK, while First Active was merged into Ulster Bank by British parent RBS Group.

Danish-owned National Irish Bank last month said it was closing down its 27 branches to focus on phone and internet banking and “personal banking units” where customers can meet bankers in nine locations.

NIB has a tie-up with An Post where customers can lodge cash and cheques at the country’s network of 1,100 post offices.

AIB is also extending a long-standing deal with An Post that will allow the bank to close branches where there are a small number of staff serving an equally small number of customers in buildings that cost a lot to run.

Explaining its closures, NIB said that research had shown that online banking had increased by 14 per cent in the past 12 months.

Other data could better explain NIB’s move – it had €4.2 billion in deposits through 27 branches in March; online bank Rabodirect has €3.6 billion and not a single Irish branch.

AIB has floated the idea of “self-service kiosks” while Belgian-owned KBC is planning “pop-up” outlets in shopping centres. The latter creates a public counter over which a bank can sell products at a fraction of the cost of staffing and running a full-service branch.

Offering clever computer, tablet or smart-phone-based services has an added attraction – it brings higher-value customers to whom banks can “cross-sell” products.

The Irish bank-run on faceless Northern Rock in 2007 and the recent IT meltdown at Ulster Bank has shown the importance of maintaining a presence on the streets, but even Ulster Bank didn’t need all 236 branches to open late to help customers, despite one of the worst systems failures in world banking.

The banks’ plans to return to profitability won’t mean the death of the bank branch, far from it. But they must strike a balance between reducing the size of costly branch networks and retaining enough of a retail presence that, if things go wrong, customers at least have a face to talk to – or shout at, as the case may be for many of them right now.