Branch banking networks assessment using DEA:A benchmarking analysis

This paper presents a benchmarking analysis of the branches and regional banks of a large French banking group. The analysis focuses on the operational performance. Starting from an “individual” diagnostic at the branch level, a “network” diagnostic is developed at the regional banks level. The variations of performance are discussed within each regional bank and from one regional bank to another by using a DEA (“Data Envelopment Analysis”) approach. This approach allows to develop a synthetic index called the technical inefficiency score. Results reveal that 30% of these branches are efficient. Special emphasis is placed on quantifying the productive gains at the regional banks level and on practicing intra- and inter regional banks benchmarking.productivity;benchmarking;aggregate measure;branches;banking network.

Mesure de la productivité et pratique de benchmarking:le cas d’un groupe bancaire français

(VF)Cet article analyse la productivité d’un réseau de distribution bancaire. Au quotidien, la productivité d’une agence bancaire est évaluée par une multitude de ratios, ce qui ne facilite pas la prise de décision des managers. En particulier, il peut-être délicat de se faire une opinion sur la performance d’une agence lorsque de multiple ratios conduisent à des conclusions différentes sur sa productivité. Nous proposons ici une mesure globale de la productivité dont l’objet est de faciliter la prise de décision des managers. Nous mesurons la productivité de 1611 agences réparties au sein de 16 groupes bancaires. Nous montrons qu’il existe des variations de productivité à l’intérieur de chaque groupe bancaire et également entre chaque groupe bancaire à partir d’une approche DEA (« Data Envelopment Analysis »). Cette approche s’appuie sur le principe de comparaison pour calculer un indicateur de la productivité globale, elle favorise ainsi la pratique du benchmarking. C’est par comparaison aux meilleures pratiques que l’indicateur de performance est calculé. A better understanding of the productivity of a bank branch makes it easier to resolve strategic questions at the banking group level. Conventionally, numerous ratios with output factors such as interest-bearing deposits, personal loans or financial savings, and input factors such as capital funds, labour or the number of accounts are used to measure the various facets of productivity. We measure the productivity of 1611 branches divided into 16 banking groups. From the individual branches diagnostic we propose a “network” diagnostic at the banking group level. We discuss the variations of productivity within each banking group and from one banking group to another by using a DEA (“Data Envelopment Analysis”) approach. This approach makes it possible to develop a synthetic productivity index and to practice benchmarking.productivité;benchmarking;réseaux d’agences bancaires;productivity;bank branches network.

Performance measures of retail banking networks: a decision support tool

In this paper, we apply a standard model of performance evaluation to the retail banking industry. In this framework, the global economic performance is broken down into technical efficiency related to the optimal use of resources and price efficiency related to the optimal choice of a product-mix. Our main contribution is twofold. First we adapt this traditional framework to the retail banking network by giving a relevant interpretation of the efficiency measures at the branch manager and at the regional top management levels. Second, we relate explicitly the product-mix efficiency to the market environment and to the size of branches. We postulate that branches in different environments could face different production technologies and that optimal product-mixes could vary with the size of the branches. We take a sample size of 1585 branches from a single bank brand breaking down in 17 French regions. We use a nonparametric approach to model the production technologies and to identify optimal benchmarks. Our main objective is to end up with a decision support tool for the top bank management in order to plan product-mix strategies and to give the right incentives to branches’ managers. This tool should prove useful since, in retail banking networks, such tools have to be simple, robust, easy to control, and adapted to the vertical organization of the banking network.

Mesures de performance opérationnelle et prise de décision au sein des réseaux de distribution : l’outil au service du manager

Dans ce papier nous discutons l’adaptabilité des indicateurs de performance opérationnelle à l’environnement organisationnel, décisionnel et stratégique des entités évaluées. L’application empirique est réalisée sur une population de 1585 agences bancaires à partir de données issues de l’exercice comptable 2005. A l’aide d’une analyse factorielle nous montrons qu’il existe de la cohérence entre les différents indicateurs mais qu’ils ne sont pas substituables entre eux dans le sens où chacun répond à un contexte managérial.Performance opérationnelle;productivité;efficience;réseaux de distribution;agences bancaires.

Impact of trade area environment on bank's comparative advantages

This article analyses the relationship between the comparative advantages of bank branches and the trade area environment. Bank branches are points of sale whose trade environment influences their activities and performance. Comparative advantages are defined, for each output mix, by the strict dominance of a production technology in a specific trade area over the production technologies of other environments. Using Shephard's output distance functions on a sample of 728 bank branches, we compare the production technologies for different output mixes and different trade environments. We show that none of the production technologies strictly dominates the others and none of them is strictly dominated. Therefore, each trade area benefits from comparative advantages that we try to highlight. Finally, we evaluate the performance of the central banks regarding their ability to provide the right incentives on output mixes to their bank branches so that the latter may benefit from their comparative advantages.