Branch banking has gone through significant changes in response to a more competitive financial services market. The main objective of this study is to investigate whether branch restrictions are favorable or not as compared to branch expansions for AIB. The collected data were analyzed by using descriptive statistics and linear regression analysis. In the study it was found out that about 58% of branches of AIB incurred a loss as at December 31, 2012. Few branches such as Head office, Legehar, Gofa Sefer, and Merkato helped the bank to be profitable at large. Specifically, out of the 49 city branches, 49% were loss making branches. Besides, out of 43 outlying branches, 67% incurred a loss. Moreover, out of 31 new branches of AIB under study, 84% were at loss as at December 31, 2012. On the other hand, we found that branch expansion drive may not help the bank rise up deposit mobilization as deposits and loans out standings will continue to be concentrated in big branches. However, as opposed to the operational inefficiencies of the new branches, the bank is moving aggressively towards expanding branches. But the expansions of new branches imply the creation of additional losses and which is adversely affecting the profitability of the bank. Therefore, the bank should restrict its branches particularly in the face of growing inefficient branches. In line with this, the existing branches should be strengthened with new banking technologies rather than distributing resources everywhere in a way to expand branches which proved to be inefficient

Keywords: Awash International bank (AIB), Branch expansion, branch restriction, deposits, loans, profits

Article Review Status: Published

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