European banks are cutting branches like never before as the pandemic pushes clients away from bricks-and-mortar.

Spanish lender Banco de Sabadell SA’s UK TSB unit said this week it will close more than a third of its branches, just a week after Deutsche Bank AG announced it will shutter a fifth of its network. Sweden’s Handelsbanken AB recently presented plan to slash the number of its branches by almost half.

The Covid-19 pandemic has accelerated client usage of online banking after many physical locations were shuttered and consumers sought distance from public places to mitigate the risk of virus exposure. With many branches now costing more than they earn, lenders are accelerating the shift online.

"Closing any of our branches is never an easy decision, but our customers are banking differently - with a marked shift to digital banking,” TSB chief executive officer Debbie Crosbie said in a statement.

Several lenders including Commerzbank AG opted for permanent closures by deciding not to reopen hundreds of the branches they previously had planned to only close temporarily to deal with the pandemic.

European banks have cut their outposts for more than decade, data from the European Central Bank shows. However, the recent announcements on average represent a third of the banks’ outlets, highlighting how the pandemic has sped up the closures.

A pick-up in mergers is another important driver, with the tie-up of Spanish banks Bankia SA and Caixabank SA potentially leading to a reduction of 1,500 branches, according to newspaper Expansion.

The nature of branches is changing too. Commerzbank is planning to convert as many as 300 of the about 500 branches that may survive its next turnaround plan into service center points to save on leases and salaries, Bloomberg News has reported.

Other banks including UniCredit SpA plan to shift the focus of branches from handling client transactions, which is moving online, to providing advice, chief executive officer Jean Pierre Mustier said Thursday. That, too, is likely to reduce the need for branch staff.

"We have to look at clearly how are branches are operating and the format of the branch will evolve,” Mustier said. "They will shift more toward advisory rather than transactions or execution of transactions for the clients.”

 - Bloomberg