Global cost-to-income ratios show regional diversions for banks

Banks across the globe generally continued to improve their cost-to-income ratios in 2016, though results differed widely on a regional level, an analysis by S&P Global Market Intelligence shows.

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. The economic, financial and regulatory environment of each country can also impact the ratios.

For the majority of countries in North America, the Middle East and Africa, banks' average cost-to-income ratios improved year over year, while the ratio deteriorated in the majority of European and Latin American countries.

Importantly, banks around the world 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 full-year period available. In the majority of cases, that was 2016; however, for a portion of the banks in the sample, the most recent data was older.