S&P Global Market Intelligence

German and Japanese banks continue to lag in global efficiency ranking

18 June 2018
By Gabe LeDonne and Francis Garrido

Efficiency laggards in Germany and Japan are weighing down incremental progress among banks in improving the global cost-to-income trend, an analysis from S&P Global Market Intelligence shows. Roughly two-thirds of the countries included in the analysis saw average cost-to-income ratios improve, leading the global ratio to fall for a fourth consecutive year to 52.93% from 55.33% in 2016.

Europe

Despite the German performance, much of Europe saw improvement during the year — and some countries markedly so. The average for banks in Belgium improved by 15.54 percentage points, while in the U.K. and Portugal it declined by more than 9 percentage points. On the flip side, however, French banks saw their cost-to-income ratios worsen in 2017, with the average rising 7.54 percentage points to 74.41%. Among the country's major banks, both Société Générale SA and Groupe BPCE had 2017 ratios at or above 70%. The biggest annual deterioration in the region, however, came from Ukraine, where the average ratio shot 10.29 percentage points higher to 59.69%.

Asia-Pacific

Regionally, banks in 10 of the 16 Asia-Pacific countries in the sample experienced year-over-year improvement. South Korea posted the biggest drop in the average cost-to-income ratio, improving 8.48 percentage points to 54.35% to effectively reverse the deterioration seen in 2016. Vietnam-based banks also booked notable efficiency gains, with the average ratio improving 4.92 percentage points to 51.72%. China continued to boost the region's lowest average cost-to-income ratio, despite seeing a 1.15-percentage-point increase in 2017. The 206 Chinese banks included in the sample had an average ratio of 33.58%, compared to 32.44% the previous year.

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Global Bank Ranking Map s.

US and Canada

In the U.S., the average cost-to-income ratio improved to 60.45% from 61.20% year over year, while Canada's ticked down to 59.28% from 60.34%. Among the region's 15 largest banks, Morgan Stanley had the highest cost-to-income ratio at 71.79%, while Capital One Financial Corp. had the lowest at 51.24%.

Latin America

Of the Latin American countries (along with Mexico) in the sample, all but two showed year-over-year improvement in their cost-to-income ratios — Peru and Colombia. Banks in Venezuela, which is battling an economic crisis marked by hyperinflation, experienced the biggest improvement, dropping to 40.93% from 52.33%. However, there is a wide gap among the country's banks, with Banco Bicentenario del Pueblo de la Clase Obrera Mujer y Comunas Banco Univ CA posting a ratio of 79.13% for 2017, while Banco Occidental de Descuento Banco Universal C. A. had a 31.50% ratio.

Middle East and Africa

Some countries in the MEA region experienced large shifts in cost-to-income ratios in 2017. Most notably, Iraq, which in 2016 had one of the lowest ratios in the world, recorded one of the world's highest following a sample-leading 51.48-percentage-point increase to 74.38%. Algeria also saw a sizable jump of nearly 21 percentage points to 45.61%. Still, most of the 14 countries included in the sample improved their ratios, including Sudan and Angola, where the average ratio declined by roughly 13 percentage points.