Banks continued to report strong quarterly earnings on Friday, but presented a mixed bag of efficiency ratios. An uptick in efficiency ratios generally indicates a decline in profitability, with an ideal ratio considered to be 50% or below.

Bank Automation News has compiled the efficiency ratios reported by banks for Q1 of 2021 and Q4 of 2020, and this snapshot signals that while larger banks have already been able to repair their bottom lines, smaller institutions may still need some time to catch up.

Source: US Federal Reserve

• The $1.24 trillion Morgan Stanley reported an expense efficiency ratio of 67%, indicating improvement over the previous quarter’s ratio of 74%.
• PNC Financial reported an improved efficiency ratio of 61% for the first quarter of 2021, an improvement of 3 percentage points over the previous quarter.
• Citizens Bank revealed in its reported quarterly earnings that the $183 billion bank’s efficiency ratio slipped a couple of percentage points from last quarter to 61% for Q1.
• Ally Financial took a hit of 4 percentage points on its efficiency ratio, which slipped to 57%.

Increased technology spending was called out by some banks as a reason for a rise in yearly expenses, and also reflects how financial institutions are leveraging technology to keep workflows on track at a time when a large chunk of staff has been working remotely.

Bank of New York Mellon’s quarterly earnings released today revealed that the $1.9 trillion bank earned $3.92 billion in revenue, down 5% on yearly basis. The bank’s non-interest expenses went up 5% year over year, mostly as a result of higher spending on staff, technology and the unfavorable impact of a weaker dollar. Citizens Bank also registered an uptick in non-interest expenditure and its expenditure on equipment and software expenses rose by 12% due to “continued investments in technology,” according to its earnings report.

In its quarterly earnings report, PNC Financial offered updates on its acquisition of BBVA USA, noting that it has “established direct connections between PNC and BBVA USA data centers, and initiated test data transmissions and mapping.” PNC is plotting a system and bank conversion by the last quarter of this year and plans to “conduct mock application and technology conversions to ensure system readiness,” according to the report.