WFC - Bank Efficiency Ratio: The Carl Perkins Of Bank Due Diligence

• Bank efficiency ratios are an effective and easy means of comparing management’s ability to control overhead.
• Efficiency ratios have spiked in 2020 due to larger loan write-offs and additions to loan loss reserves.
• According to Bank Director magazine, the secret to generating low efficiency ratios is to increase revenue faster than expenses.
• Operating leverage is important when comparing efficiency ratios.
• "It is not just how much you spend - it is how many dollars of revenue each dollar of expense creates."

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