For sale: 3,500 banks

'There's a glut on the market. They're cheap because they can't really be used as anything else' 'If a bank moves out, it starts a stampede'; One branch returned to its original use as a four-bedroom house with a swimming pool

Once it was a NatWest branch, now it's a wine bar. Others are derelict and many more are to close - a monumental headache for the owners

THE Moon and Sixpence on Wardour Street in Soho, London, is humming on a Thursday night. Film makers from West End companies crowd the far corner beside the shrine to the comedian Tony Hancock. Some patrons are vying to win a bottle of wine in the garish tie competition. Another group of customers is at the bar, under a glowing blue chandelier that looks like a constellation of descending UFOs. Around the walls, just above head height, is a narrow moulding, painted in the style of Paul Gauguin, a former local resident. The pub is busiest after work and at lunch-time, when bankers from the National Westminster branch on Oxford Street regularly come down for their burgers.

The bankers must feel at home. The JD Wetherspoon chain's pub used to be a branch of Barclays. But like hundreds of other branches across the country it was closed, then sold and converted 18 months ago at a cost of pounds 250,000. The work lasted almost two months. Taking the armoured door off the cellar vault, where the beer kegs are now kept, took a week alone. Although it is a listed building, the interior shows few signs of its former use. Only the marble and sandstone exterior, with its arched, oak- trimmed windows, reminds one of Barclays.

Not all branches discarded by high street banks are lucky enough to find a second life. Across the country in the inner cities, elegant, century- old bank buildings stand forlorn, their windows boarded up, their doors perhaps permanently barred. Some that have been recently sold sat abandoned for years before a buyer was found.

Industry observers think the worst is yet to come. In 1989 Britain had 13,467 bank branches, according to British Bankers Association figures. Five years later, 2,390 had closed, an average of two on every working day. In the five years previous to that, only 890 had been shut. And these figures are minus new openings, so they undoubtedly understate the number of traditional branches that have closed.

Philip Molyneux, director of the Institute of European Finance in Bangor, Wales, estimates another 3,500 branches will go in the next decade. "Given the acceleration in mergers, acquisitions, and restructurings, that would be a conservative estimate," he said. If he is right, Britain will end up with only half as many branches in 2004 as it had in 1984.

On top of the losses at the leading banks are a wave of closures at building societies as they merge, convert to full banks or become embroil- ed in takeover bids. The Alliance & Leicester announced 40 closures on Thursday alone, cutting its branch network to fewer than 350. Although building societies tend to have newer properties, some of their branches operate from old bank buildings sold off in previous rationalisation.

Getting rid of unwanted branches is becoming a monumental - and expensive - head-ache for the banks. "They must consider these empty branches as liabilities," said Philip Water-field, a director of Stretton Chartered Surveyors in London's East End. Before the recession hit property markets, the few branches that did go up for sale were snapped up by wine bars and restaurants eager for a prestige setting. For the privilege, they paid a premium. "They were a bit more of a novelty then," said Mr Waterfield. No longer. "There's a glut on the market," said Malcolm Flegg, a partner in the building surveyor Tuffin, Ferraby & Taylor. "They're cheapish because they're not really usable as anything else." Gordon Porter, the property manager at the Royal Bank of Scotland, agrees that there has been a downturn in demand over the last five years. "We found it difficult in some locations to sell."

The sale of one whitewashed Grade II listed NatWest branch in Limehouse will go ahead this week for just pounds 112,500, little more than a reasonably priced house. The buyer, Peabody Housing Trust, plans to lease the space to local community groups. Paul Canty, Peabody's project manager, is enthusiastic about the purchase. "They were always seen, like churches, as the pillars of society."

Yet it is unlikely that the banks have written their valuations down from the inflated 1980s levels. One banking analyst calculated that if the remaining stock sells for a conser- vative 10 per cent below book value, it could cost the banks between a quarter and half a billion pounds to get rid of them.

Rationalisation of the industry, such as the merger last week between Lloyds Bank and TSB, will add to the building surveyors' lists. When they announced their merger, the bosses of both Lloyds and TSB were at pains to say there would be no immediate branch closures in addition to those already planned. For the TSB that involves a cut of 200 this year. Lloyds has always been more secretive about its plans - its customers sometimes only find out when they are issued a new chequebook. In fact, the law requires the merged company to get a private Member's Bill through the House of Commons for a unified banking licence before it can force customers to shift from a TSB branch to a Lloyds one or vice- versa. It expects the procedure will take up to two years.

Consolidation is not the only force sounding the death knell for the traditional high street branch. Electronic banking is pushing in the same direction. For many, cash is something you get from the ubiquitous hole- in-the wall machines - or even from supermarket checkouts.

Soon electronic banking could mean direct access to your customer accounts through computers and modems in the home and office.

The restructuring of bank hierarchies has accelerated the demise of the branch. The traditional bank manager responsible for lending decisions at local level has been phased out. All but minor decisions are made centrally or regionally.

Several banks, notably Barclays, say they have completed their branch network re-organisations. Barclays has closed

500 branches since 1990, but only six in the first six months of this year. Net figures like that do not mean they are staying in their old homes, however. The type of business the banks are conducting is changing. "We sell about 200 different kinds of products," said Peter Armstrong, head of property portfolio management at NatWest. That kind of business calls for a different type of branch, one with an open floor plan dotted with desks, rather than walled off with counters topped by bullet-proof windows. "The premises we have traditionally owned are less suitable for that," said Mr Armstrong. "We have quite a problem with the legacy of the past. We have closed a lot of branches and will continue to close them. But some of these properties we're keeping because they have a strong revenue stream."

The problem for the banks is that not many other businesses want the old stone piles either. Bank branches, though often on prime high street land, are poorly suited for retail operations. Conversion costs run high - witness Wetherspoon's snag with the vault at The Moon and Sixpence. Maintenance can be expensive, and many have listing restrictions preventing demolition.

Ironically, the big advantage with banks is that it is often easy to get planning permission to put them to a commercial use. The floors above the banking hall are even easier to dispose of. During the heyday of British bank expansion in the late 19th and early 20th centuries, managers and senior staff often lived on the premises. Although they have long since moved out, the rooms are relatively easy to renovate as flats or offices.

NatWest has been a leader in that kind of conversion. Over the past three years it has helped create 125 new units with the help of the Government's Living Over the Shop initiative and now has 700 residential tenants generating pounds 100,000 in income a year. Housing associations have leased the properties for up to 30 years with the help of pounds 2m in public funds and a pounds 500,000 investment by the bank. The biggest development is over its Granby Street branch in Leicester, with 20 flats.

Pub companies are increasingly enthusiastic about bank branches. "Part of the charm of Wetherspoon is we use existing buildings," said Tim Martin, the chain's chairman. "We'd be foolish to try to change them." Of its 115 pubs, 15 are former banks. This week it will open a huge new 5,000 sq ft pub in Derby in an old bank building on Iron Gate that had been derelict for two years. After paying pounds 500,000 for the property, the pub chain pumped in pounds 1.5m of renovations with the help of Mr Flegg of Tuffin, Ferraby & Taylor. "We don't care if it's derelict or messy. If it's in a good location we'll go for it," Mr Martin said.

Other businesses have also found them to be suitable premises. While most branches end up as offices, pubs or restaurants, a few have been converted to less likely uses. Mappin & Webb has its Oxford Street jewellery shop in an old NatWest building. Star Trimmings, which supplies zippers and buttons to the rag trade, has taken over one old branch in Hackney, while a bank building on Lower Clapton Road in London became a supermarket. The NatWest branch on Reading Road, Burghfield Common, in Berkshire, was sold two years ago and returned to its original use - as a four-bedroom detached house with swimming-pool.

Bank employees and customers of redundant branches face rather different problems. Ron Cooney, 81 and confined to a wheelchair, found he had to travel to Soho Square to bank when the Wardour Street Barclays closed after he had been with it almost 30 years. Today his accounts are at the Halifax building society. "Closing it was pretty awful," he said, although he is not unhappy with the new pub.

Others are less flexible. The demise of high street branches is fiercely opposed by the Banking, Insurance and Finance Union, whose members stand to lose their jobs. Already, more than 100,000 jobs have disappeared in the 1990s. Among its fears are that areas left without a branch of any bank - usually inner-city slums and remote villages - may slip deeper into decay. Local shop owners will have to travel further to make night deposits, and cash will be siphoned out of the local economy.

Aston, a poor area of Birmingham famous for the Villa football ground, had 25 bank branches at the end of the 1980s. By last summer it had just five. The banks are "pulling the plug on the economic destiny of this community", charges Pat Conaty, spokesman for the Birmingham Settlement project, a voluntary community group. "If a bank puts up the boards and moves out of the high street, it sends out all sorts of terrible messages. It starts a stampede. It puts the skids under the community."

To counter the banks' withdrawal, Mr Conaty has set up the Aston Reinvestment Trust, which will start operating as an investment fund next April and, he hopes, will eventually be big enough to win a banking licence. If successful, the move will echo the foundation of other banks, notably TSB.

The banks maintain they are not retreating from the high street, just shifting their emphasis to provide better customer service. Mr Armstrong at NatWest said: "We're not abandoning it. There is still a market on the high street for bricks and mortar."

Or at least steel and glass. As the 20th century draws to a close so too are the days when banks looked like banks, exuding a comfortable sense of security and permanence. Already a generation is growing up that will think those architectural delights of the Victorian and Edwardian eras were designed not as pillars of society, but for pubs, restaurants and even chippies.