Will North American Banks Get Serious About Efficiency?

North American banks have long tolerated a high cost-to-income ratio, at 60% as of June 2024, relative to their peers in other regions. No doubt some of the difference stems from structural factors such as wage rates and the fragmented nature of the US market. However, branch-heavy footprints, an overreliance on paper check payments, and other outdated practices also contribute to the inefficiency of North American banks.  

Some banks have started to address this challenge by focusing on improving the core business rather than trying to address it through separate digital banks and the like. Their tactics range from rationalizing branch and office locations, to automating back-office tasks, to providing digital tools that raise relationship managers’ productivity in the most attractive profit pools. We estimate that the opportunity could reach up to $200 billion in lower costs if the North American banks shown here went from a ratio of 60% to the 42% of comparable Nordic banks.