European banks are cutting costs in absolute terms, but many are still failing to pull down their cost-to-income ratios, according to data from S&P Global Market Intelligence.
A sample of 17 European banks with at least €500 billion in assets shows that 12 reduced operating expenses year over year in the first quarter, yet only five saw cost-to-income ratios decline. Unhelpful markets and low interest rates have served to hit revenues and leave very few European banks earning double-digit returns.
Cost reduction features prominently in the strategic goals of many European banks, but long-term success appears debatable at best. The leading lenders' cost-to-income ratios climbed steadily during the past decade; both net interest income and operating expenses rose some 60% over the period. Net interest income has shown generally stronger growth than costs but has been weaker on a risk-adjusted basis.
The full report can be accessed here: http://www.snl.com/web/
Source: S&P Global Market Intelligence