Measuring the Relative Efficiency of Bank Branches: The Case of the Agricultural Bank of Greece

This paper investigates the relative efficiency of a sample of 19 bank branches of the Agricultural Bank of Greece for the years 2002 and 2003 by using data envelopment analysis. The present study uses the intermediation approach to define bank inputs and outputs. The empirical results indicate that 36.8% of the bank branches operated fully efficiently in both years. In addition, the results indicate that for the input-oriented DEA the mean efficiency levels are 81.9% and 79% for the years 2002 and 2003, respectively, while for the outputoriented DEA the mean efficiency levels are 129.9% and 135.7% for the years 2002 and 2003, respectively. The efficiency performance is also related to the profitability performance. It is found that several bank branches operated at low efficiency levels and meliorated profitability standards. Another issue that is analyzed is the procedure for changing the levels of inputs and outputs to increase the branching efficiency. The results indicate that the branching efficiency can be increased by reducing loans whose payback is delayed for over 180 days. Finally, a sensitivity analysis is performed, which indicates that efficiency is rather more sensitive to loans whose payback is delayed for over 180 days and to commission fees and other non-interest incomes.

Keywords: Bank branches, efficiency, DEA, sensitivity analysis.