Evaluating the Financial Performance of Bank Branches

CORE Discussion Paper No. 2003/94

34 Pages Posted: 23 Apr 2007

See all articles by Jesús T. Pastor

Jesús T. Pastor

Miguel Hernandez University

C.A. Knox Lovell

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics

Henry Tulkens

Catholic University of Louvain - Center for Operations Research and Econometrics (CORE)

Date Written: December 2003

Abstract

In this paper we evaluate the financial performance of virtually all of the branch offices of a large European savings bank for a recent sixmonth accounting period. We employ a complementary pair of nonparametric techniques to evaluate their financial performance, in terms of their ability to conserve on the expenses they incur in the process of building their customer bases and providing customer services valued by the bank. We find substantial variation in the ability of branch offices to perform this task, and substantial agreement on the identity of the branches at the bottom of the performance distribution. We then employ parametric techniques to determine that the list of indicators on which their financial performance is currently evaluated can be substantially reduced without statistically significant loss of information to bank management. Both findings suggest ways in which the bank can increase the profitability of its branch network.

Keywords: banking, performance indicators, efficiency

JEL Classification: D20, G21, C60

Suggested Citation

Pastor Ciurana, Jesús Tadeo and Lovell, C.A. Knox and Tulkens, Henry, Evaluating the Financial Performance of Bank Branches (December 2003). Available at SSRN: https://ssrn.com/abstract=981389 or http://dx.doi.org/10.2139/ssrn.981389

Jesús Tadeo Pastor Ciurana (Contact Author)

Miguel Hernandez University ( email )

Elche Campus, La Galia Building
Avda. del Ferrocarril, s/n
03202 Elche
Spain
+34 96-665-8621 (Phone)
+34 96-665-8715 (Fax)

HOME PAGE: http://www.umh.es/frame.asp?url=/busquedas/resultados.asp?qu=Jesus%20T.%20Pastor

C.A. Knox Lovell

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics ( email )

Athens, GA 30602
United States
706-542-3689 (Phone)

Henry Tulkens

Catholic University of Louvain - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium
+32 10 47 43 21 (Phone)
+32 10 47 43 01 (Fax)

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