HSBC announced on Thursday that eight branches will be closed as part of a shift to digital banking. HSBC Malta CEO Andrew Beane gave Jacob Borg an overview of the reasoning behind these changes. 

• Redundancies will be voluntary
• Closures reflect changes in customers' lifestyle
• Discussion under way with bankers' union

HSBC announced this morning that it is closing down [eight] branches. Is this part of an orderly retreat from the island? 

Actually what we announced is a future-focussed change to our business model. It is really important to understand why.

There are profound changes to the way customers are living their lives and using banks. The numbers are quite incredible. Globally, we are seeing that 80 per cent of bank transactions are done digitally, 40 per cent are on mobile devices.

These trends are coming to Malta fast. We are seeing a 60 per cent increase every year in digital usage. We are seeing traditional cash and cheque volumes are going down 10 per cent each year. So like any service business, you need to organise around what your customers are doing.

These are profound changes and we need to change our business model. Yes we are changing our branches, but also we just launched our new mobile app…

We do not want to be a digital only bank. That is not our future vision. I think the successful banks of the future will have great digital, but they will also have great branches, so that you can do those simple day-to-day things on your app.

When you have a meaningful moment in life, like you want to buy a house, you want some advice or you have an issue you can walk in and talk to someone you trust.

So it’s about balancing the model to respond to those changes that we are seeing. We are really following what our customers are doing. 

Are you saying HSBC is committed to Malta? 

Well I think one of the things people should look at is we have announced the launch of a flagship branch which will open in the first quarter of next year in Qormi, which I think will be really exciting. 

We are going to put in some of the best of HSBC’s global solutions. There’s also some super experience we can put in the branch. This will be our largest branch in the country. We have already started works for the opening process, so there will be lots of new stuff, as well as things that we are changing. 

So is that a yes? 

Well I can only talk about the actions we are taking. You can see we are making investments as well as making changes. So this is a programme about meeting the future needs of customers. 

You seem very non-committal about HSBC’s future in Malta…

We never make long-dated strategic statements. What we look at is the needs of our customers. We make choices to best serve them. What I can say to them is the actions we are taking. We have launched a new mobile app, we just launched a new internet banking.

We are planting 20,000 trees across the country as part of the launch process. We have a new branch here in Qormi. Four new wealth management centres. We are going to re-configure our offering. Our branches today close too early.

Our customers’ lifestyles aren’t always well suited to the hours that we are open. Like many business we have to modernise and change. 

Have these closures been long in the offing? Was it part of a plan? 

I think it would be wrong to over-emphasise branch closures as the only thing that is happening here. 

The digital investment is as significant if not more significant than those actions in terms of the investments that are required. 

Again 60 per cent increase year-on-year, that’s what customers are doing. We have to organise around it.

Of course from time-to-time we have to look at our branch network. I think we are going to have fewer branches but better ones. That are more flexible, with more people, with more services that open more house, and with improved accessibility. 

Many of the branches that are going to be closed down are in less economically affluent areas. Is this part of a strategy where you are going to move away from offering services to the ordinary man in the street? 

It is absolutely not! We want to be a bank that serves all society. We look very closely at the distribution of our branches to make sure that people have got convenient access. 

We are going to have 40 ATMs beyond our physical branch locations, so that’s 56 locations where people can access HSBC. 

The vast majority of our customers are ordinary people, using ordinary services. We have opened more than 5,000 customer accounts this year, so we are welcoming many new customers to HSBC, not just affluent customers. 

Again, this proves the same point. 95 per cent of them have chosen to apply online. Whilst I don’t think all of banking is suddenly going to go digital, it is a reality that customers lives are changing, and changing quickly. We have to change with them. 

What’s your target for the voluntary redundancy scheme? How many jobs are you hoping to cut? 

Well a couple of key points to this. The first is we greatly respect the view of the Malta Union of Bank Employees. Because of the stock market confidentiality obligations, we can only start proper consultations with them today. 

The details of the programme are not yet finalised. We are not going to disclose a number at this point, both for that and also I really emphasise the 'v' for voluntary.

No employee is going to be asked to do anything they don’t want to. 
This will be a choice that people can make. For those who would prefer to stay with HSBC, even if they are at a part of the bank that is changing, they will be exciting new opportunities elsewhere in the business. 

How will that work? If there isn’t enough uptake for the voluntary redundancy scheme, you won’t really be cutting that many costs. 

I think we will find that people will consider the scheme attractive. We have seen that in the past and have no reason to believe it will be different this time. 

Equally, it will be wrong of me to guide on something where as you rightly say, the outcome is uncertain. 

It is important that I stress the voluntary word. It is for our employees to choose. I think will help us re-organise the business and make it better for customers in the long-term. 

Have you had an initial reaction from the bankers’ union? 

We have only just started talking to them. We will continue that process over the coming days. We have a good relationship with them.

We deeply respect their views. We will take that into consideration as we finalise the programme and we will be happy to provide more detail. 

I think the right and professional thing to do is to talk to them and factor their views into our plans. 

What about the staff? It must be very demoralising for anyone working at those branches. 

Clearly it’s a shock if there’s a change and we understand that. We have done our best to tell our employees first thing this morning. Under the stock market obligations, it prevents us from briefing people before we have told the stock market. 

The senior leadership team are out in those branches today with our employees, explaining the change to them. Again, change is part of business. I would stress that where we are making changes, as they affect individuals that work for us, they are voluntary. 

So if an individual works in a branch that is closing and they would prefer to stay with HSBC, which we hope a number will choose to do, there are many exciting opportunities elsewhere in the bank. We will work with them to find that new opportunity for them. 

Was this a decision taken by HSBC Malta, or is it part of a global strategy? 

It is a local strategic decision. It has been carefully considered by the board. One of the board’s job is to look at what the right business model for the bank’s success in the long-term. 

The factors we have had to think about most significantly are the profound changes in customer behaviour. There is also a reality that interest rates across the EU have become negative.

They are negative 0.5 per cent and that means when we take deposits from customers, we don’t charge personal customers negative interest rates and we have no intention to. 

The shareholders are bearing the cost of that. It is an economic reality that in negative interest rates it is less profitable to run a bank, so we have to manage our costs carefully. 

Last year the impression was given that the difficult de-risking period was over. The impression was that there was finally going to be stability and now this comes as a bolt out of the blue. When are things going to settle down at HSBC? 

Well the risk management programme has been a great success.  We are stepping forward with confidence. This is not about re-trenching. This is about stepping forward to meet the needs of customers as they change. 

I have been very committed strategically that we put Mata’s leading digital services into HSBC. I believe our app will be the best in the country, that customers will love it. 

Growth in banking in the future will look different. I think if you as a business do not have the courage and conviction to respond to that, ultimately your customers, your colleagues and your shareholders suffer in the long-term. 

Is the Maltese banking sector in trouble? We’ve had several high profile bank closures, lots of scandals. Where do you see it going? 

Well I can only talk about HSBC. Clearly in today’s world, meeting the rules and regulations of the banking sector is essential. 

I have spoken publicly before that it is imperative that the whole sector does that. Clearly, there is more work to do. 

Today, HSBC reports about 85 per cent of all suspicious transactions in the domestic banking sector. Clearly, that proportion needs to go down as work is done more broadly to raise standards. 

For us, having made that change through the hard work of my colleagues and the understanding of our customers, we are now stepping into the future. 
It is like building a strong house. Once you have strong foundations, you can build great things on top of it. That’s what today’s change is about. 

How has the government reacted to this news? 

Obviously we have briefed the government. We welcome their perspective and will continue to discuss with them in the coming days exactly what I’ve explained to you this morning, that this really reflects changes in the way customers are living their lifestyles.

As I say, I download The Times each morning onto my Ipad, which is different to what I would have probably done 10 years ago. 

We have the highest social media penetration in Europe here in Malta. We need to organise banking in a similar way.