International branch expansion and bank performance: Assessing the effects on revenue generation in the British banking industry

The impact of foreign branch operations on commercial bank performance remains inconclusive, with existing studies reporting mixed findings and offering limited evidence from the British banking sector. Moreover, prior research often assumes a linear relationship between internationalization and performance, overlooking variations across bank size and business models. This study addresses these gaps by examining the effect of foreign branch operations on the financial performance of 50 UK commercial banks between 2012 and 2021. Using secondary data and panel regression techniques, the study evaluates the relationship between internationalization and key performance indicators, including return on assets (ROA), return on equity (ROE), net interest margin (NIM), and cost-to-income ratio (CIR). The findings reveal that the effects of foreign branch operations are heterogeneous and non-linear. While greater internationalization is generally associated with lower profitability and operational efficiency, particularly among smaller retail and commercial banks, evidence suggests that performance benefits may emerge at higher levels of internationalization. The study contributes to the banking internationalization literature by demonstrating that the performance effects of foreign expansion depend on bank-specific characteristics and the extent of international involvement. The findings challenge simplified models of bank internationalization and support a contingent perspective, offering practical implications for bank managers, regulators, and policymakers seeking to balance growth opportunities with the risks of international expansion.