For most banks, staff costs represent the single largest item of operating expenses, and keeping them under control is vital for a bank’s profitability. Measuring those staff costs against gross operating income provides an indication of the productivity of a bank’s staff.
Many banks choose not to break out their staff costs as a separate item in their accounts – for example, no Japanese banks disclose this information. But using available data still provides a snapshot of which countries have relatively efficient staffing models.
Developed markets might once have been seen as the most sophisticated banking sectors, with their staffing structures rationalised by frequent rounds of management consultancy. But today, emerging markets dominate the list of lowest staff costs to income ratios. Turkey and South Africa both lead the way, with staff expenses at less than 18% of gross operating income.
And any stereotypes about state-owned companies do not necessarily apply to Chinese banks – staff costs at Agricultural Bank of China, in which the government st
ill holds a controlling stake, are less than 23% of operating income.
The most productive bankers in western Europe are to be found in Norway, coming in at number six in our list. Alongside Singapore at number five, this suggests that banks with small, very affluent home markets are able to draw on deep local sources of funding to build their balance sheets without requiring large, costly branch networks.
At the other end of the scale, European countries dominate those with the highest staff expenses. Switzerland’s model of premium services for high-net worth clients comes at premium salaries – the country has by some distance the most expensive staff compared to operating income. The scale and swiftness of the financial crisis in Greece may also explain the high staff cost ratio there. Revenues have slumped as the economy contracts, and banks will be reluctant to make extreme adjustments to their branch networks and staff structures.
