National Bank of Canada has undertaken the biggest branch reduction, cutting 17 per cent of its locations, even after acquiring Alberta-based Canadian Western Bank last year.Melissa Tait/The Globe and Mail
Canada’s biggest banks could slash costs by shuttering branches across the country, with Toronto-Dominion Bank TD-T positioned to save the most through cuts, according to a Bank of Nova Scotia BNS-T report.
Scotiabank analyst Mike Rizvanovic said the six largest lenders could improve their personal banking unit efficiency ratios – a key metric of productivity that measures expenses as a percentage of revenues – by 8 per cent if they were to close branches within three kilometres of other locations.
Among the group, TD would have the most to gain theoretically if the lender were to close locations within a three-kilometre proximity, which would result in a 41-per-cent cut to its expansive branch network.
“While management teams have consistently noted the importance of the Canadian branch network, we believe that the increasing digitization of financial services allows for a more rapid pace of branch consolidation in the years ahead,” Mr. Rizvanovic said in a research note on Monday.
However, TD said Monday it is committed to investing in its branch network, as retail locations are still a key driver of business growth, with most new client acquisition and complex advice taking place in person. The lender continues to evaluate staffing, hours and locations based on local client needs.
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“We regularly assess our physical footprint and evolve our branches and digital offerings to ensure they’re positioned where clients need them most, supporting both in-person advice and digital access,” TD spokesperson Ashleigh Murphy said in an e-mail statement.
“Our priority is to ensure clients can access the advice and support they need – when, where and how it works best for them."
Canadian banks have been closing retail locations to lower expenses as consumers and businesses increasingly shift to digital banking platforms. Critics say the reduction in branches leaves rural and remote communities with poorer access to banking services.
The number of Canadian branch locations has dropped over the past decade, falling about 12 per cent since 2015, Mr. Rizvanovic said. In the previous decade, branch networks grew about 7 per cent.
National Bank of Canada NA-T has undertaken the biggest branch reduction, cutting 17 per cent of its locations, even after acquiring Alberta-based Canadian Western Bank last year, according to the note. Royal Bank of Canada RY-T posted the smallest decline at 9 per cent, buffered by its takeover of HSBC Bank Canada in 2024.
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Mr. Rizvanovic upgraded his rating on TD to sector outperform because of its significant potential for cost-cutting opportunities as higher interest rates dampen loan demand and put pressure on revenue generation across the sector. Branch reduction potential is just one factor in Mr. Rizvanovic’s analysis as TD works to reduce expenses across the bank.
Big banks in other countries have significantly reduced their branch networks. Four large lenders in Sweden decreased their locations by 60 per cent over a 20-year period as of the end of the 2024 fiscal year. In Australia, major banks have reduced their branch networks by about 40 per cent in the same period.
“While the large banks may not ultimately cut branches to that extent in Canada, we do believe that there is a clear pathway to moderation,” Mr. Rizvanovic said.
Digital banking has become the primary channel for more than three-quarters of Canadians, according to a 2024 report by the Canadian Bankers Association.
“Today, customers can interact with their bank many ways – mobile apps, online banking, branches, telephone banking, mobile banking advisers and specialists,“ CBA spokesperson Ethan Teclu said in an e-mail statement. “This approach has contributed to making Canadian banks amongst the most trusted banking systems in the world.”
However, remote and rural Canadians must travel further to access in-person services and cash. When a rural community loses its last branch, the travel distance would almost double to 17.6 kilometres from 9.6 kilometres, according to a 2023 report by the Bank of Canada.
Mr. Rizvanovic said he expects the banks would reinvest the cost savings from branch closings into initiatives that would generate revenue and grow their businesses.