Comparative efficiency analysis of Greek bank branches in the light of the financial crisis

During financial crises, which suppress the profitability of banks, it is a common practice for management to aim to minimize inefficiencies in bank operations. This paper reports on an assessment of the efficiency in operations of homogenous branches of a large Greek bank, before and during the crisis, in two different areas: their efficiency in managing the economic record of the branches and their efficiency in generating profits. We have used the non-parametric method input-oriented data envelopment analysis (DEA) under variable returns to scale, for the different efficiency assessments. The results indicated that the average pure technical efficiency both in the two dimensions reduced during the credit crunch period, and mostly for the average profit efficiency. The differences are statistically significant. Performance comparisons on each dimension allowed us to identify those branches that showed a consistently efficient or inefficient behavior over the total period of analysis and form an overall picture of the performance of bank branches. We found that there is the scope for substantial efficiency improvements in the branch network through cost controls and credit risk management, in order to offset the negative impact on earnings caused by the crisis.