How to Calculate Expense-to-Revenue Ratio

How to Calculate Expense-to-Revenue Ratio
You can measure a bank's efficiency with the expense-to-revenue ratio.

Find a bank's total non-interest expense on its income statement. A bank typically provides the total amount of non-interest expense, which includes items such as salaries, rent, depreciation and utilities.

Find a bank's net interest income and non-interest income on its income statement. A bank typically provides the total of each amount. Non-interest income includes items such as fee income and service charges.

Calculate the sum of net interest income and non-interest income. For example, add $400,000 in net interest income to $600,000 in non-interest income. This equals $1 million in total net interest income and non-interest income.

Divide the bank's total non-interest expense by the sum of its net interest income and non-interest income to determine its expense-to-revenue ratio. For example, divide $450,000 in non-interest expense by the $1 million sum of net interest income and non-interest income. This equals 0.45.

Move the decimal two places to the right in your result to convert it to a percentage. In the example, convert 0.45 to 45 percent, which is the bank's efficiency ratio.