Banks shuttering smaller urban branches amid shift of strategy

Community banks, which are bank branches operating in residential neighborhoods, have been closing in recent months in major Chinese cities as banks change their business strategies.

The Beijing Youth Daily reported on February 5 that in the past four months, State-owned banks, joint stock banks, city and urban commercial banks and overseas banks have closed 326 branches, with more than half of them being community branches or small and micro-sized branches.

According to the report, in 2017, regulators approved the closure of nearly 70 community bank branches in Beijing.

In East China's Zhejiang Province, 24 bank branches have closed since the beginning of December, with 19 of them being community banks, according to a report published by Zhejiang news portal zjol.com.cn on February 6.

The banking regulator in South China's Guangdong Province approved the closure of 21 community bank branches, while 13 community banks have closed in Shanghai in the past year.

Community bank branches are often set up in neighborhoods by larger banks.

They are usually smaller than ordinary bank branches but have a more comfortable environment with facilities like book corners and play areas for children, the Beijing Youth Daily report noted, adding that the trend of community bank establishment started around 2013.

Zhao Yarui, a senior research fellow at the Financial Research Center under the Bank of Communications, said that the branch closures represent a shift in banks' strategy.

"The original aim of launching community banks was convenience for urban residents, such as wealth management and small loans. But it's been hard for those banks to get customers, and so their operational costs are relatively high," Zhao told the Global Times.

"Now, younger customers are more familiar with mobile banks or internet finance, and bigger customers tend to hire private wealth management managers to take care of their assets," Zhao said.

He added that if the branches aren't profitable, there's no need to keep them open.

"I think it's not a bad strategy [to close the branches]. It's just that banks need to adjust their strategies and find a better management direction," she noted.