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The interior of a Royal Bank of Canada branch. Cost cuts have hit the bank’s brick-and-mortar operations, as the number of tellers has greatly decreased in recent years.

Royal Bank of Canada has been reducing its work force by an average of 1,200 employees a year over the past five years, as the lender targets inefficiencies arising from shifting consumer preferences.

The reductions come amid a dramatic transformation by all of Canada's biggest banks. Increasingly, consumers are making transactions on their smartphones and computers, rather than visiting traditional branches, pushing banks to reallocate resources. At the same time, banks are cutting costs as they deal with slowing revenue growth, low interest rates and tapped-out borrowers.

"We are watching the pace of change of our customer very carefully, and we know that there's significant change afoot – how they shop, how they use channels – but you can't get too far ahead of them," RBC chief executive officer Dave McKay said at an investor conference on Wednesday.

In its latest quarterly filings, RBC said it employed nearly 77,000 people full-time, up from about 69,000 employees in 2011, implying substantial net payroll gains over the five-year period.

But the overall numbers obscure significant changes: While the lender has hired employees in areas that support the bank's digital transformation, brick-and-mortar branches appear to be an area where deep cuts have been made.

Mr. McKay said that, since 2008, the number of tellers has fallen to about 6,000 from 11,000.

Yet, he stressed that efficiency at the bank has improved while customer satisfaction scores have risen. Earlier this year, RBC won the coveted J.D. Power 2016 Canadian Retail Banking Satisfaction Study for the first time.

"You're trying to reposition your cost base, but you're trying to keep your employees engaged and your clients liking you," Mr. McKay said.

While RBC's competitors have booked a combined $2-billion in one-time restructuring charges since 2013, largely related to their own payroll cuts, RBC stayed clear of such charges over this period. No banks reported payroll-related charges in their most recent results.

Mr. McKay said he prefers to absorb the charges regularly through the bank's income, but left the door open should the environment deteriorate substantially.

"If there is a significant change or we find a business underperforming or there's been a radical change in the revenue environment, we're going to adjust our cost base," he said. "I think we're doing a good job, but doesn't mean the job is done."

Other bank CEOs also addressed the topic of cost-cutting at the same conference.

Bharat Masrani, CEO of Toronto-Dominion Bank, said that the bank's restructuring efforts in 2015 are now completed and will drive savings of $600-million by next year. However, he didn't rule out further cost-cutting.

"Never is a long time," Mr. Masrani said. "But this part of our restructuring is complete and I don't anticipate anything stemming from that in the imminent future."

Brian Porter, CEO of Bank of Nova Scotia, stressed that much of the bank's recent cost-cutting was in response to a greater need to increase spending on technology.

"We don't want to be caught in a mode where we're reactive all the time. We want to be pro-active," Mr. Porter said.

He pointed to recent high-profile executive appointments from outside the bank and the construction of an off-campus building to house the bank's technology staff, who are working on new ways for consumers to perform banking transactions.

"If you go to a main branch at any bank today, it is going to take you 30, 35 minutes to open an account," Mr. Porter said. "You can do that on your phone now or on your computer and get that done in 3.5 to four minutes."

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 27/03/24 3:59pm EDT.

SymbolName% changeLast
BNS-N
Bank of Nova Scotia
+1.51%51.16
BNS-T
Bank of Nova Scotia
+1.4%69.42
RY-N
Royal Bank of Canada
-0.12%100.28
RY-T
Royal Bank of Canada
+1.12%136.23
Y-T
Yellow Pages Ltd
+0.2%9.89

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