Abstract

Determination of Potential Business in Branch Office Planning of Banks

The limitation of potential business that goes hand in hand with the increasing concentration of the branch office network and the rising costs in the field of personnel and physical assets demand a careful examination of the investment decision when opening new branches. In this connection decisive importance attaches to the anticipated business potential, since the success of a branch office depends essentially on the volume of business. Since branch office policy, as an instrument of business policy, is oriented primarily to customers sensitive to spatial preferences, the business activities of branch offices are limited mainly to business with the general public (mass business), and in this latter type of business the main emphasis - from the standpoint of the effect on the balance sheet - is on savings deposits. The expected volume of savings deposited with a branch office is obtained from the expected number of savers multiplied by the expected average credit balance per saver. Both values can be derived from experience at existing branch offices. In this connection it is important to know the determinants on which the size of the market share depends. In this respect, apart from the mean distance from the potential customer to the branch office, mention should be made above all of population growth in conjunction with the propensity to contract, competition intensity, the number of outward commuters and the age of a branch office. Similarly it is necessary to determine the factors on which the amount of the average credit balance per saver depends. If these data obtained from existing branch offices are applied to the market area of planned branch offices, it is possible to derive the expected volume of savings deposits via the expected number of savers and the presumable average credit balance. A similar procedure can be adopted to determine the potential business in other services.