Determinants of Bank Branch Presence in Local Areas: A Comparison Between North and South of Italy

A close relationship with customers, mainly achieved through the opening of local branches, has long been a fundamental key to competitive advantage in the banking sector. Financial innovation, changes in customer behavior and competitive dynamics have transformed this relationship over time, leading to the closure of numerous branches. This work explores the determinants of branch evolution in an advanced and notoriously bank-centric country (Italy) using NUTS 3 panel data over the 2000-2016 time-span. Results show how - in general - demographic, industrial and economic variables explain the dynamics of banks’ branch location strategy. However, more heterogeneous evidence emerges when North and South Italy are taken into consideration separately suggesting that territorial and regional dimension might play a role even in the banking sector.