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Cost-to-Income Ratios of Banks Worldwide

With many of the world's banks having reported results for the period ended Dec. 31, 2015, S&P Global Market Intelligence took a bird's-eye view of bank efficiency around the world by looking at cost-to-income ratios for institutions with at least US$10 billion in assets.

The ratio, which measures operating expense as a percentage of operating income, is used to gauge efficiency and productivity for banks. Lower ratios generally indicate higher efficiency, but a number of factors can affect the ratio, including a bank's business model and size.

For example, as the Reserve Bank of Australia noted in its September 2014 Financial Stability Review, banks that focus on commercial banking and generate a greater share of their income from interest income "tended to have lower [cost-to-income] ratios than 'universal' banks, which earned a larger share of their income through non-interest sources such as investment banking or wealth management."

Banks in Brazil were the least efficient in the analysis, with an average cost-to-income ratio of 98.17%
 When looking at banks across countries and regions, it is important to highlight that the economic, financial and regulatory environment of each country can affect cost-to-income ratios. Banks around the world also report financial results for a given period on different timelines, sometimes with fiscal year-ends that do not correspond to the calendar year-end. S&P Global Market Intelligence used data available for each bank for the most recent six-month period ending in 2015. Therefore, while the results included in this analysis do not perfectly line up in terms of time periods reported, they offer insight into the performance of banks in the 2015 calendar year.

According to data available as of March 23, banks in Egypt, on average, were the most efficient. Of the countries with at least three banks included in the S&P Global Market Intelligence analysis, Egypt posted the lowest average cost-to-income ratio at 27.70%. Of the four Egyptian banks included in the analysis, two had ratios for the six months ended Dec. 31, while the other two had ratios for the six months ended June 30, 2015.

Average Cost-to-Income Ratios in Select Countries

Chinese banks had an average ratio of 32.73%. Banks in Qatar, Kuwait and the United Arab Emirates posted average ratios of 33.12%, 36.86% and 37.04%, respectively.

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 On the other end of the spectrum, banks in Brazil were the least efficient in the analysis, with an average cost-to-income ratio of 98.17%. Banks in the U.K. recorded an average cost-to-income ratio of 76.84%, while those in Israel had an average ratio of 73.46%. Banks in Germany posted an average cost-to-income ratio of 71.58%, and those in the Netherlands came in at 67.72%. Most banks in these countries have reported results for the period ended Dec. 31.

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