Michigan National Corp. is redesigning its branch system in an attempt to boost revenues.
In the next three years, the Farmington Hills-based company plans to close more than 50 traditional branches and replace many of them with supermarket offices.
Total square footage in Michigan National's 200-branch network would be reduced by about 27%, said chief executive officer Douglas E. Ebert.
The restructuring is part of a plan to focus on growth businesses and reduce overhead expenses. The plan has so far prompted $11 million of charges against earnings, taken in the fiscal year that ended Sept. 30. Half of that was spent on the branch redesign.
The $10 billion-asset company is concentrating on investment management, retail banking, and lending to small and midsize businesses. It also has a fledgling agricultural lending division.
While Michigan National, a unit of National Australia Bank Ltd., hopes eventually to reduce overhead expenses, the branch redesign is intended to sell more investment products, Mr. Ebert said.
He declined to state specific revenue goals but said the restructuring was needed to continue earning more than 1.5% on assets. Michigan National contributes about 10% of $149 billion-asset National Australia's net income.
"The rationale has not been expense-driven," Mr. Ebert said of the program. "We have a finite amount of resources. We need to invest in businesses that will give us an economic return three, four, or six years from now."
So far, three traditional branches have been closed and five smaller branches opened this year. Four of the new branches are in supermarkets. The company also sold three branches this year in western Michigan.
Mr. Ebert said he doesn't anticipate substantial additional charges to earnings. He also said layoffs would be minimal. The company has about 3,500 employees.
In addition to reconfiguring branches, Michigan National has outsourced some services and is leaving certain businesses.
Mr. Ebert said about one-third of the restructuring charges covered the costs of leaving some businesses. The company decided early this year, for example, to stop indirect lending. But Michigan National will retain its $400 million portfolio of these loans.
Michigan National has also gotten out of the business of keeping records for 401(k) retirement plans.
"Michigan National, at its size, cannot be all things to all people, but there are some things they can do very well," said Michael Moran, an analyst at Roney Capital Markets, Detroit.