efficiency analysis in Banking

In an era of mature markets and intensive competitive pressure, more and more companies realise that their most precious asset is their existing customer base. This realisation has resulted in a rise in emphasis on customer relationship management, in order to retain customers. This is a major area on which banks need to concentrate. Banks tend to be reactive to customer attrition, and many times it is too late to retain a customer. Customer attrition needs to be minimised, and loyal customers need to be rewarded. The objective of this study to identify the factors affecting customer attrition of trust accounts for a leading American financial services company. The company realised that its trust accounts were getting closed after a period of seven to twelve years. Initially, the company tried to identify the root cause using a small set of data, but they were unable to do so. This triggered the use of analytics to build a model to predict customer churn, and come up with strategies to retain customers. This was achieved by applying data mining techniques to the transactions history of the accounts that closed down as against those that remained active.

Banks are one of the important players in the financial system in any economy. This study evaluate the financial performance of commercial banks in Bahrain. This study is based on eight commercial banks for the period from 2005 to 2015. The data used in this study are obtained from published annual reports and websites of the respective banks, investor's guide, newspaper, newsletters of the banks and from Central Bank of Bahrain website. We used regression, correlation analysis & t-tests to determine the relationship between different financial parameters. The results of the study indicate that the profitability has an impact on capital adequacy and financial leverage, whereas the study did not ratify the relationship between the profitability and efficiency of the banks. This study also reveals that enforcement of higher capital adequacy ratio will adversely affects the profitability of the banks. The impact of financial and oil crisis might have influenced the financial leverage of the banks there by resulted in an adverse effect on the profitability of the banks.

This study aims to examine and determine the effects of corporate
governance on the efficiency of the Indonesian banking sector. The research
calculated DEA efficiency and performed logistic regression, with a total
sample of 150 observations. Results show that independent commissioners,
the educational level of commissioners, the board of commissioners
meeting, and the term of office of the commissioners all have a significant
impact on improving the efficiency of the banking industry. Conversely,
the large number of commissioners as well as the gender do not have any
effect on banking efficiency. These findings indicate that authorities should
not focus on the size of the board and the gender among the board
commissioners in finding ways to increase or decrease a firm’s efficiency.
The results of this study can contribute to academic research through
agency theory and resource dependence theory as well as provide insights
that can be used by practitioners.

In this paper we investigate the efficiency differentials among Italian local banks situated across the Italian territory as well as the effect of local environmental factors on their performances. We assess technical and cost efficiency modelling banking production set through the “asset approach” and using DEA assuming variable returns to scale. The data are taken from ABI over the 1994 - 2008 period. Including in the production set local environmental factors measured at the Travel-to-Work Area level, above all the employment rate and value added per worker, basically erases the efficiency gap between Northern and Southern banks. Hence, there do not seem to exist compelling reasons to overthrow the relationship-banking system currently characterising much of local banking in Italy.

This paper investigates the financial performance of commercial banks in Greece for the period 2007-2011, which is marked by the severe financial crisis. The efficiency assessment of Greek banks is based on financial figures and ratios. For this purpose a representative dataset of seven Greek commercial banking institutions is selected and exhaustive empirical research is employed based on financial, correlation and regression analyses in order to estimate the impact of selected independent variables (asset utilization, operational efficiency and bank size) on financial performance indicators (net interest margin and return on assets). The output of this research implies that during the tested period large banks in terms of deposits, credits, assets and shareholders’ equity under-perform in comparison with small banks. Moreover, significant correlations are reported between efficiency indicators and independent variables, remarks that are also confirmed from regression analysis resu...

Non compensatory choices are widespread in the economics, strategic management and decision making. Nevertheless, many assessments of productivity still fail to consider non-compensatory preference structures in the measure of the technical inefficiency. This paper proposes a preference elicitation schema, typical of Multi-criteria decision analysis, for the selection of the directional vector in the assessment of a sustainable productivity. The direction choice is based on the weighted aggregation of concordance indexes for each decision criteria on each individual input, such that it represents an index of relative importance according to the decision maker's perspective. The methodology can be used to aid resource allocation and saving, identify benchmarks for efficient practices and more generally for planning environmental policies in many services and industrial organizations. We illustrate the method with an environmental efficiency evaluation of Brazilian Federal Saving Bank branches.

In this paper we analyze the impact of the current financial crisis on the determination of technical efficiency in a sample of Italian small banks, highlighting the interaction of the crisis with different regulatory regimes existing for cooperative banks (CB’s) and other banks. We find that the crisis has a negative impact on efficiency, more so for CB's. This is to be expected, as the CB's principle of external mutuality and their branching regulations are likely to locate them in less performing areas. In accordance with this prior, the differential impact of the crisis attenuates or vanishes when we include in the production set some indicators of local environment (GDP per capita). Correspondingly, we find novel evidence in favour of the “bad luck” hypothesis suggested by Berger and De Young (Journal of Banking and Finance, 1997).

El presente trabajo analiza la situación de la banca mexicana en materia de indices de eficiencia (particularmente eficiencia distributiva o eficiencia X) de/ periodo de 2008 al 2012. La intención de este análisis fue contrastar los indices alcanzados por el sistema financiero mexicano y compararlos con los niveles que presentaron otros sistemas del mundo con características similares. De esta forma se pudo determinar el lugar qué ocupa Mexico con respecto a la muestra seleccionada en materia de eficiencia de su sector financiero. La metodología que se utilizó fue el análisis envolvente de datos (a través del uso del Sistema de Medición de Eficiencia - EMS por sus siglas en ingles). Los resultados que se obtuvieron si denotan que los bancos que fueron consistentes en sus niveles de eficiencia a lo largo del tiempo, pertenecen a países que muestran a su vez mayores niveles de eficiencia durante el periodo de análisis.

In this paper we analyze the impact of the current financial crisis on the determination of technical efficiency in a sample of Italian small banks, highlighting the interaction of the crisis with different regulatory regimes existing for cooperative banks (CB’s) and other banks. We find that the crisis has a negative impact on efficiency, more so for CB's. This is to be expected, as the CB's principle of external mutuality and their branching regulations are likely to locate them in less performing areas. In accordance with this prior, the differential impact of the crisis attenuates or vanishes when we include in the production set some indicators of local environment (GDP per capita). Correspondingly, we find novel evidence in favour of the “bad luck” hypothesis suggested by Berger and De Young (Journal of Banking and Finance, 1997).