FOR
IMMEDIATE RELEASE
CONTACT:
Marketing Department
The Robert E. Nolan Company
972-248-3727 x113
fax 972-733-1427
marketing@renolan.com
www.renolan.com
Banks with the Best Efficiency Ratios are Not Always the Top
Line-of-Business Performers
DALLAS, Texas, October 22, 2003 — Top performing banks in mortgage
lending, commercial lending and retail banking have 20 to 25 percent
better overall efficiency ratios (operating expense divided by the sum
of net interest and non-interest income) than average performers in
these lines of business. Conversely, highly efficient banks in the
consumer lending, mortgage servicing and managed trust areas are
likely to have total bank efficiency ratios ranging from nine to 20
percent higher than average performers in these key areas.
These are findings from the 2003 Efficiency Ratio Benchmarking Study
conducted by the Robert E. Nolan Company, a consulting firm
specializing in the banking industry.
The annual study provides an analysis of efficiency and productivity
at a much more granular level than other banking industry peer group
studies. For the participating banks and thrifts ranging in asset size
from $4 billion to $86 billion in this year’s study, Nolan generates
1,100 measures to examine the impact of each line of business on
overall bank efficiency. By calculating the efficiency ratio and
examining certain productivity measures, the study pinpoints
participant gaps in performance that, if narrowed, will result in
significant bottom-line improvement.
Other study findings include:
 |
Certain lines of
business, no matter how efficient, have little impact on overall
bank performance and should be assigned lower priority when scouting
areas to improve operations. |
|
The efficiency of
mortgage origination for banks with the best overall efficiency
ratios more than offsets below average performance in the mortgage
servicing function. |
|
Commercial lending,
segmented into administration and market-type loan origination lines
of business, ranks as a highly important component of overall bank
efficiency. |
|
Retail branches,
though large in terms of overall expense and revenue, rank very low
in their relative importance to the total bank efficiency ratio. |
