Rita Nnabuihe

The purpose of this paper is to identify the key variables associated with total deposits (from chequing and savings accounts) of two of Puerto Rico’s major financial institutions; Banco Popular and Scotiabank. This study can be used to understand the current distribution of branch network and location strategies. It is essential to understand the location strategy adopted by a thriving bank in a specific market because of the difficulty in determining the number of branches required to service a country and the variables that influence branch performance. Three research questions were investigated in this study. A combination of a descriptive and stepwise regression model was created and used to understand the variables that impact total deposits in Puerto Rico. First, a stepwise regression model was created for the largest financial institution across Puerto Rico, by creating a model that indentifies the variables required to increase a banks presence. The second model, separated branches into urban and rural areas and the intent was to measure the variables that impact total deposits in two different environmental settings. The third research question was based on a descriptive analysis of a financial institution with a small branch network, so as to understand the specific variables that drive total deposits. From the regression model, total population, age of the branch and cannibalization were key variables that influenced branch performance. In addition, the model explains the different markets that exist in urban and rural settings, therefore revealing the variables that a bank could target in either of these environments. The key variables identified in each model showed that an under-performing bank can increase its presence in a market by increasing network size and targeting a variety of customers specific to the location.