Question

1. What are factors weighing on the decision to establish a new branch.Determine the impact of a new branch’s expected return on the bank’s total return from its existing branches and other assets Determine the impact of a new branch’s on the bank’s total risk

Answer 1

Factors which are indicating decision to establish a new branch-

A. Growth and expansion strategy of the bank

B. Increasing customer base can be another reason for establishing new branch

C. Increasing its core competitiveness can another reason for establishment of new branch

D. Increasing competition in the business industry can force the bank to open new branches in order to counter the competition

E. Bank can also increase number of branches in order to increase its profits and stability in the long run

New branch expected return will be related to the return of other branch and bank itself because it would be leading to to provide the bank with an idea about the performance of the new branches and if these branches are performing exceedingly well by providing a high rate of return than bank will be encouraged to open more branches and the other branches of the bank which are existing in nature are forced to modify their way of operation so this will be helping in betterment of the operation of the bank.

the total risk of the bank will be declining because of high level of diversification and expansion so businesses of bank are less prone to risk due to opening of new branches.