What is the best tool for making difficult decisions around branch performance? Many in North America and Europe believe that their regions are as much as 20% overbranched, yet very few banks are reducing their networks. Many are struggling with understanding how to evaluate branch value: if branches are going to succeed or fail, how can we separate the winners from the also-rans?

As “The Poverty of Branch-Centric Accounting” demonstrates, when measuring branch success or failure, the P&L performance of the branch is practically irrelevant. Branch-centric accounting simply does not support confident action. Most banks do not trust their own numbers, as systematically biased accounting commonly overstates revenues and understates expenses. While the branch is still the leader for product sales and account openings among channels, for most banks, the branch receives more credit than it deserves, as most remote channel activities are linked to branches. The corollary, of course, is that remote channels are almost by definition unprofitable: they receive scant recognition for the sales they aid, and no domiciling of the account openings they actually record.

Further complicating matters, systematically biased branch-centric accounting often causes all branches to (falsely) appear profitable; although the majority of bank customers and product sales—when accurately accounted—lose money, branch accounting shows all branches in the black.

For more about successfully evaluating branches, our members can read our complete study on “The Poverty of Branch-Centric Accounting.”