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Developing countries top for efficiency

Emerging markets are coming up trumps in terms of bank cost-to-income ratios, with Africa the top ranking region and Qatar the top ranking country.  
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regional average cost-to-income ratios; Best cost-to-income ratio by country; Cost-to-income ratios of Top 25 banks

With a striking 32.86% cost-to-income ratio, China’s Industrial and Commercial Bank of China is the most efficient bank out of the world’s top 25 largest lenders. Chinese banks, in fact, dominate the list and occupy its first five positions, with ratios ranging between 32.86% and 40.28%.

The Asia-Pacific region as a whole has been steadily improving its average cost to income, which lowered to 40.73% from 50.88% and 55.17% in 2012 and 2011, respectively. China is, however, the only Asian country represented in the ranking. Data for the other Asian banks that would have been eligible because of their size (Japan’s Mitsubishi UFJ, Sumitomo Mitsui, Mizuho and Norinchukin Bank) was not available before going to press. These banks were replaced by the next four in the global list.

All remaining positions are held by Western banks. Spain’s Santander sits in sixth place, followed by Italy’s Intesa Sanpaolo and UK’s Lloyds. Wells Fargo is the highest scoring US bank in 10th place, with a 56.78% ratio – an improvement from 58.52% in last year’s rankings. Goldman Sachs also improved its efficiency ratio to 67.99% from 78.11%, as well as Italy’s UniCredit, which lowered its cost to income to 57.14% from 64.43%.

All other western European and US banks in the ranking, however, deteriorated their standing. This is shown on a regional level too. Western Europe’s average cost to income has gone up to 62.62% from 58.97% in 2012, while North America’s efficiency level worsened to 67.27% from 64.63%.

At the bottom of the table, Royal Bank of Scotland’s cost-to-income ratio rose to 89.32% from 62.19% during 2012, and Morgan Stanley’s number deteriorated to 96.38% from 80.37%.

In contrast to the industrialised world, emerging markets fared well. After Asia-Pacific, the most noticeable improvement was achieved by central and eastern Europe, where average cost to income moved down to 48.44% from 56.19%. The region of central and South America also lowered its average ratio to 50.67% from 55.27%, while Africa’s ratio rose only slightly to 51.07% from 49.88% in 2012's rankings. The Middle East remained virtually unchanged in terms of efficiency, with a 39.03% ratio compared with last year’s 39.69%.

Countries in the Middle East were the best performers, led by Qatar with an impressive 23.25% and followed by Saudi Arabia’s 31.16%, United Arab Emirates’ 32.16% and Kuwait’s 32.39%. Kazakhstan tops the Asia-Pacific countries, with a 33.28% ratio, while China and Singapore scored 36.57% and 37.91%, respectively.

Africa, central and South America, and emerging Europe are also represented in the most efficient 10 countries, helped by strong average ratios by Angola, Panama and Belarus.

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Silvia Pavoni is editor in chief of The Banker. Silvia also serves as an advisory board member for the Women of the Future Programme and for the European Risk Management Council, and is part of the London council of non-profit WILL, Women in Leadership in Latin America. In 2019, she was awarded an honorary fellowship by City University of London.
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