TD to open smaller branches with more technology as it ‘prunes’ retail footprint in U.S.

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Toronto-Dominion Bank is set to continue “pruning” branches as the pandemic unwinds, while building new brick-and-mortar locations with less space but more technology.

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More Canadians have turned to digital banking options as pandemic restrictions forced banks to temporary close branches or reduce capacity. The customers who adopted online financial services tools out of necessity are likely to continue banking digitally even after pandemic restrictions are lifted, and that could usher in a new era for branch banking, according to the chief executive officer of TD’s U.S. division, Greg Braca.

TD closed 82 branches in the United States in February to reallocate resources to digital banking alternatives. The lender’s footprint of 1,140 U.S. branches — down from more than 1,200 before the pandemic shuttered economies in March 2020 — stretches down the country’s east coast, from Maine to Florida.

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The culling of branches was the result of a two-to-three-year acceleration in digital adoption rates ushered in by the pandemic, a shift that has cemented itself permanently in the way customers want to conduct their banking, Braca said at a Barclays financial conference on Wednesday.

“We saw far more uptake in digital signup and people who never wanted to engage either on mobile or on a laptop now looking to engage with us in that way,” Braca said. “All we’re doing is making sure that we’re being smart around that and reinvesting some of that savings from pruning into other capabilities, whether it’s new technology, digital, data or things like that that our customers are looking for.”

While TD’s U.S. bank division was already closing 12 to 20 branches each year as a part of a routine rejigging of its retail footprint even before the pandemic, it is also planning to open new ones by the end of the year, Braca said. The focus will be in areas where the bank is plotting to grab more market share, including Florida and the southwest region of the country.

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But those new locations will be smaller than branches of the past, with technology taking on more of the work.

“What you’ll likely see is that many of those locations, as we open them up from scratch, maybe they don’t have the same square footage as they once did because of technology and digital engagement,” Braca said. “They will be far more wired and connected across the organization than they would have ever been in the past.”

The Big Six banks have avoided sweeping branch closures in Canada, but the boom in online banking users has prompted speculation on whether banks will close brick-and-mortar locations. The lenders have also been under pressure to cut costs as record low interest rates weigh on revenue.

The rest of Canada’s largest lenders have also said they expect to gradually close select branches. Since the pandemic started, for example, Royal Bank of Canada has shed nearly 30 of its 1,300 branches and Bank of Montreal has closed less than 50, largely in the United States.

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