Page 5 - Bank Financials (I)

Efficiency Ratio:

Warren Buffett has intimated in the past that there are two

ways a bank can generate outsized returns, one of which is

to be a “very low-cost operator.” A bank’s success at

managing expenses is gauged by the efficiency ratio, which

divides a bank’s operating expenses by its net revenue –

lower is better. Ideally, you’re looking for ratios under 60%.