# Efficiency Ratio

Non-interest expense as a percentage of revenue before loan losses. Lower is better.

## Definition

The efficiency ratio (cost-to-income) measures how much a bank spends to generate each dollar of revenue. Loan-loss provisions are left out: they are a credit cost, not an operating one. Lower is better.

## Formula

(Non-Interest Expense ÷ Revenue before Loan Losses) × 100

## Why it matters

Efficiency ratio is the bank-sector measure of operating discipline. Below 50% is excellent; 50–60% is industry-typical; above 70% indicates a bank struggling to control costs against its revenue base.

## How Standard Equity uses it

Substituted for operating margin in bank reports. Lower numbers display as better-performing.

## The metric

| Category   | Banks      |
| ---------- | ---------- |
| Unit       | %          |
| Applies to | Banks only |

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