Modeling bank branch profitability and effectiveness by means of DEA

Purpose – The purpose of this paper is to provide a framework for evaluating the overall performance of bank branches in terms of profitability efficiency and effectiveness. Design/methodology/approach – Applying a two‐stage DEA model to a sample of bank branches of a large commercial bank in Greece this study disaggregates overall performance into profitability efficiency and effectiveness. Findings – The results indicate that superior insights can be obtained by employing the proposed two‐stage DEA model compared to the outcomes from the analysis based on selected key performance indicators (KPIs). Some relations between profitability efficiency and effectiveness are also investigated. Originality/value – The study highlights the importance of encouraging increased profitability and efficiency throughout the branch network of the commercial bank under study.