Banking · Branch Profitability Analysis
While conducting a Profitability Analysis of Bank Branches, it is noticed that a branch with an exceptionally high deposit base in a suburban area has a very low Profit per Employee ratio. The branch's Cost to Income Ratio is also high. What is the most probable reason for this anomaly, suggesting a critical area for immediate attention?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The branch is focusing heavily on risky unsecured personal loans to maximize return.
- 2The branch is efficiently cross-selling third-party products, which boosts its Non-Interest Income.
- 3The bank's headquarters has allocated an excessive amount of equity capital to the branch.
- 4The branch has a high proportion of high-cost Term Deposits and is not effectively converting them into high-yield loans.✓
Correct answer
The branch has a high proportion of high-cost Term Deposits and is not effectively converting them into high-yield loans.
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