A global survey of banks shows which are the leanest and fattest in terms of their cost-efficiency ratios, based on latest available figures.

Chinese banks are some of the world’s most efficient when ranked by their cost/efficiency ratios, with US banks somewhat less lean and European banks relatively “fat”, while Brazilian banks are the worst in this regard, according to figures from Standard & Poor’s.

S&P Global Market Intelligence examined banks’ efficiency around the world, analysing cost/income ratios for institutions with at least $10 billion of assets. Not all the institutions measured are pure-play private banks and some are general banks. The report was based on data available for each bank for the most recent six-month period ending in 2015.

In recent years, the wealth management industry has seen ratios widen as compliance-related costs in the aftermath of the global financial crisis have taken their toll. According to groups such as Scorpio, the consultancy, ratios have been averaging close to 80 per cent in many private banks, with some variations. The high ratios partly explain why there has been a flurry of M&A activity in some markets and why banks have trimmed and re-focused their booking centres. In a recent example, UK-listed Barclays is selling its Hong Kong and Singapore private banking operations to Singapore-headquartered Bank of Singapore, part of OCBC.

Based on data available as of 23 March, S&P said that banks in Egypt, on average, were the most efficient. Of the countries with at least three banks included in the analysis, Egypt posted the lowest average cost-to-income ratio at 27.70 per cent. 

Chinese banks had an average ratio of 32.73 per cent. Banks in Qatar, Kuwait and the United Arab Emirates posted average ratios of 33.12 per cent, 36.86 per cent and 37.04 per cent, respectively.

Within Asia, the study showed that Singapore-based banks in the survey had an average ratio of 44 per cent; Malaysian banks' ratio was 48.5 per cent; Hong Kong banks' average ratio was 45.76 per cent, and Australia's were at 52.9 per cent.

At the other end of the spectrum, banks in Brazil were the least efficient, with an average cost/income ratio of 98.17 per cent. Banks in the UK recorded an average ratio of 76.84 per cent, while those in Israel had an average ratio of 73.46 per cent. Banks in Germany posted an average ratio of 71.56 per cent, and those in the Netherlands came in at 67.72 per cent. Most banks in these countries have reported results for the period ended 31 December. In Switzerland, the average ratio for banks was 67.03 per cent; in France it was almost 66 per cent.

Among the 15 largest banks in North America, Capital One Financial Corporation was the most efficient with a cost-to-income ratio of 53.29 per cent. Morgan Stanley had the highest ratio at 79.99 per cent.

S&P Global Market Intelligence used the ratio for consistency across regions; however banks in North America typically use another metric, known as the efficiency ratio, to calculate efficiency. This widely known ratio is defined as non-interest expense before foreclosed property expense, amortisation of intangibles, and goodwill impairments as a percentage of net interest income and non-interest revenues, excluding gains from securities transactions and nonrecurring items.

Of the 15 largest Latin American banks, Banco De Venezuela SA Banco Universal had the lowest ratio at 16.77 per cent, while Banco Santander (Brasil) SA, a unit of Spain's Banco Santander SA, had the highest ratio at 109.06 per cent.

While its Brazilian unit posted the highest cost-to-income ratio among the largest Latin American banks, Banco Santander was the most efficient of the 15 largest banks in Europe with a ratio of 55.96 per cent. UK-based Royal Bank of Scotland Group's ratio of 155.44 per cent was the highest among the largest banks in Europe.

In Africa, Nigerian banks showed a wide range of ratios. Of the 15 largest banks on the continent, Nigeria's Guaranty Trust Bank had the lowest ratio at 42.48 per cent, while the country's United Bank for Africa came in at 67.50 per cent.

Among the 15 largest Middle Eastern banks, the UAE's First Gulf Bank PJSC posted a ratio of 17.30 per cent, and Israel Discount Bank at 77.52 per cent.

In the Asia-Pacific region, many large banks have yet to report results for the 31 December period or report in other six-month periods. In the region, China's Shanghai Pudong Development Bank Co had the lowest ratio among the 15 largest banks at 20.76 per cent; the figure represents the semi-annual ratio at 30 June 2015. Japan's Mitsubishi UFJ Financial Group posted the largest ratio at 57.37 per cent.