Spatial Aspect in Bank Branch Performance Management

Abstract

In spite of the fact that both profitability and technical efficiency of bank branches are greatly influenced by the local environment in which they are located and operate, local environmental factors are scarcely incorporated in performance assessments undertaken by banks themselves. The paper stresses that localization of bank branches (i.e. their spatial aspect standing for all local socioeconomic environmental influences) is a significant factor that should be part of their performance assessment and demonstrates this for a commercial bank that runs a large retail branch network all over Slovakia. Through a case study of this Slovak bank, the paper aims to highlight the importance of the spatial aspect in explaining efficiency and economic results of bank branches, and to sketch a set of analytical procedures that may be adopted by commercial banks in internal performance assessment. Insights of geostatistics are employed in investigating the relationship between technical efficiency and profitability exhibited by the bank's branches and studying how this relationship is affected by the spatial aspect. Whereas technical efficiency stands for the voluminal dimension of a branch's performance, the profitability captures the monetary effects of the achieved performance position of a branch. It is found that for the bank's branches technical efficiency and profitability are closely related, and it is shown how this finding is relevant for bank branch performance management. A practical outcome of the analysis is that technical efficiency can be adopted by commercial banks in their internal rating systems of branch performance as a fully informative measure allowing them to assess managerial skills at a branch level. Technical efficiency scores may thus be utilized as a means of monetary stimulation of the best performing branches or in developing corrective policy strategies to manage the worst performing ones. Nonetheless, what is required is that the spatial aspect is sufficiently appreciated.

Readiness for implementing innovations in banking in advanced and emerging economies

“…A detailed analysis of scientific papers characterizing the features of the development of financial and economic relations showed the dependence of the development of banking innovations on the following factors: economic conditions, the emergence of digital currencies and their use as an alternative to fiat money (Knezevic, 2018;Nikic, 2018), the digitization of various spheres of public life (Cwiklicki & Wojnarowska, 2020;Petroye et al, 2020), the competition in the banking service market (Skvarciany et al, 2018;Aldomy et al, 2020), sufficient financial resources (Leonov et al, 2014), trust in the domestic participants of the banking system (Brychko et al, 2019(Brychko et al, , 2020, the efficiency of banks (Kasim et al, 2019;Boďa & Zimkova, 2019), business transparency (Vasilyeva et al, 2017). Structural modelling (Prayitno et al, 2021) and regression analysis (Vasilyeva et al, 2014b) are used to determine the correlation degree between banking development indicators.…”

Islamic Bank Deposits during COVID-19 Pandemic: A Spatial Finance Approach

“…Banking performance is influenced by economic growth which also takes into account aspects of spatial spillovers generated in neighboring regions (Ascani et al, 2012;Asnawi et al, 2020;Boďa & Zimkova, 2019;Mansur, 2019& Mufraini et al, 2020. The concentration of financial activities in a given region improve its economic performance thus creating the spillover effect beneficial to surrounding regions.…”