Research and Writings

Mohammad Saiful Islam (2019) The Impact of Branch Network on Bank Performance in Bangladesh, Ma. Diss., Pathum Thani: Asian Institute of Technology.

October 3, 2019

Abstract: In the economic development of a nation banks play an important role as they, to a large extent, exercise control over the money supply in circulation and are the main stimuli of economic progress. At present not only regulators, supervising institutions and bank management bodies, but also customers of the banks, are becoming increasingly concerned about the performance of these institutions. This paper is an attempt to analyze the impact of branch network on bank performance taking consideration into the PCBs operating in Bangladesh.

It is observed that from the last couple of years the number of PCBs’ branches has been rising steadily, whereas profitability of these banks has been slowing down. Basically, there exists a critical relationship between the branch network and performance of bank. Increased number of branches put pressure on the existing branches to increase their efficiency, effectiveness and customer service; but in the same time it can be held responsible on the ground that for achieving better performance they may go for aggressive banking which ultimately deteriorate their assets’ quality and earnings or their business opportunities may be shrinking for excessive competitors. This paper assesses the relationship between the branch network and the bank performance (in terms of ROA) by examining the respective data of 34 PCBs in Bangladesh from the year 2014 to 2018. A descriptive survey was used where dependent variable was ROA and independent variables were the Number of Branches, Asset Size, Net Interest Margin (NIM) and Expenditure to Income Ratio (EI). The study found that there is no significant relationship between branch network and ROA. Among the other three variables Asset Size has no significant affect on ROA, while NIM has positive and EI has negative relation with ROA. The study recommends that rather than emphasizing on branch expansion, banks should give more emphasize on advanced banking technologies and new products to boost their efficiencies and profitability.