Banking Efficiency Ratio

The Banking Efficiency Ratio is a measure that shows how well a bank manages its operating costs relative to its income. It is calculated by dividing the bank's non-interest expenses (like staff salaries and administrative costs) by its net interest income and other income. A lower ratio indicates the bank is operating more efficiently, generating more income for each dollar spent on expenses. Conversely, a higher ratio suggests higher costs relative to income, which could signal less efficiency. This ratio helps investors and management assess the bank's cost management and overall financial health.