Financial benchmarking in banking

• Main Author: Lazarević Milan
• Format: Article
• Language: English
• Published: Association of Serbian Banks 2016-01-01
• Series: Bankarstvo
• Subjects: financial benchmarking; financial analysis of banks; ratio analysis in banking; performance analysis; Serbian banking industry; clustering
• Online Access: http://scindeks-clanci.ceon.rs/data/pdf/1451-4354/2016/1451-43541603074L.pdf

Financial benchmarking (BM) is a technique of advanced managing with a view to establishing differences in financial performances, the so called gaps, compared to the competition. It represents an integral part of the overall benchmarking process the use of which involves identification of the backlogs in relation with an entity that has the function of the reference value, with the aim to find ways to overcome them. The use of financial BM is illustrated on the example of Serbian banking industry. In this process, we applied the partitioning clustering (grouping) in order to form homogenous groups from which the leaders are selected for comparison. The analysis was done on the basis of ratios for the past five years (period 2010 - 2014), which, thus, covered spatial and temporal dimensions of comparison. Following the comparison of ratios in the banking industry and non-financial corporations, their adaptation was performed taking into account the particularities of banks' operations. The benefits arising from the use of financial BM process are shown, but also the limitations considering that many important indicators are not publicly available.