FIG (Banks & Insurance)
What is a bank's efficiency ratio? A bank has $6B of noninterest expense and $10B of total revenue — compute and interpret it.
Model answer
Efficiency ratio = noninterest expense divided by total revenue (net interest income plus noninterest income): $6B / $10B = 60%, meaning the bank spends 60 cents to produce a dollar of revenue.…
The full, human-reviewed answer is in the bank.
Sign up free and Daily 10 serves you 10 questions a day from all 1,500+ — or go Pro for unlimited reps.
More from FIG (Banks & Insurance)
- Why is EV/EBITDA a meaningless multiple for a bank?
- Why does a standard unlevered DCF fail when you point it at a bank?
- Why do bankers value financial institutions on equity value only, never enterprise value?
- What does it mean when people say 'debt is raw material, not capital structure' for a bank?
- Why are capex and working capital effectively undefined concepts for a bank?
- Why is interest expense an operating item for a bank when it's a financing item everywhere else?