Cost-income ratio

The cost / income ratio ( English for cost / income ratio , also cost / income ratio ) is a central economic indicator of the efficiency of a company or a credit institution .

calculation

To calculate the cost / income ratio, the administrative expenses for the respective financial year are set in relation to the bank's income ( net interest income , net commission income or trading income less additions to risk provisioning).

${\displaystyle {\text{Aufwand-Ertrag-Verhältnis}}={\frac {\text{Verwaltungsaufwand}}{\text{Erträge (abzgl. Zuführungen zur Risikovorsorge)}}}}$

interpretation

The lower the value of the cost / income ratio, the more efficiently the bank operates. The key figure shows how many cents are necessary to generate one euro of gross profit (net interest and commission income). In order to improve the key figure, it is necessary to lower administrative costs (especially personnel costs ) and / or risk provisioning while at the same time improving net interest and commission income. However, this consideration does not make sense as the sole efficiency measurement, since the interest income is included in the calculation. This means that only banks that operate under a similar market situation can be compared. When comparing banks in markets with different interest spreads , the key figure becomes less meaningful.

Individual evidence

1. ↑ Horst Gischer, Toni Richter: Measuring the productivity of banks: the cost / income ratio - a reliable measure of performance? (PDF; 396 kB) University of Magdeburg, 2014, accessed on May 13, 2018 .