Perpetual portfolio manager Vince Pezzullo says the major banks need to make significant inroads into their costs. Pezzullo is a member of the Australian equity team at Perpetual and has oversight of financial institutions, and his view is that consumer and corporate de-leveraging is a multi-year cycle that calls for big productivity measures as a response.In an interview with Banking Day, Pezzullo said Perpetual looked at stocks on a relative basis, and with yields of 6.5 to seven per cent the banks represented good value.However, he was critical of the banks for not giving more recognition to the likelihood that demand for credit may be weak for some time. He said the branch networks were in need of an overhaul. Banks have put a lot of work into developing new branch systems, including concierge services, virtual tellers and sophisticated in-branch computers.In March, Commonwealth Bank opened a "development" branch in the Brisbane CBD, which is full of interactive tools - advanced ATMs; touch-screen computers, to support customer service; and a concierge.At the opening of the branch, Commonwealth Bank's group executive for retail banking services, Ross McEwan, said the bank had a strong commitment to its branch network. McEwan said: "There is a direct link between our ability to acquire customers and having a physical footprint."These days, he said, branches were less about providing basic transaction services and more about advisory services, business transactions and other more complex tasks.Pezzullo said it was time the banks started putting to use, throughout their networks, the innovative tools on display in the Brisbane development branch. Banks should justify the number of branches they operated.More importantly, he said, they should be deploying productive in-branch technology across their networks. If that were to happen, the number of staff in branches and the physical size of branches could be reduced.Smaller branches with fewer staff would create very big cost savings.The Australian Prudential Regulation Authority's most recent Points of Presence survey, published in June, recorded financial institutions operating 12,828 "face-to-face points of presence". Of those, 6762 were classified as offering a branch level service. The Big Four banks owned more than half the total number of branches - 3849 "points of presence offering a branch level of service".Pezzullo said: "Real productivity will come from branch efficiency. Cost growth is high in the banks and they have to do something about it."He said he was sceptical of the banks' claim that their big IT programs would lead to significant cost savings. "Most of that investment is maintenance capital expenditure on security upgrades, increasing the speed of transactions and so on. They have to spend that money. Those investments will help them avoid cost inflation but not reduce costs."In any case, IT upgrades are high risk.""If they want a significant change in their cost base, the nature of the branch network has to change."Among the Big Four, Pezzullo has a slight preference for ANZ. He looks at the banks on a price-to-book valuation and on that basis he calculates that ANZ