Japanese banks were still less efficient than most other major Asia-Pacific lenders in the first quarter of 2020 amid slow income growth and elevated operating costs, according to data compiled by S&P Global Market Intelligence.

Meanwhile, Chinese lenders scored some of the lowest cost-to-income ratios in the region in the January-March quarter, in part because of their economies of scale and relatively early adoption of financial technology, which helped mitigate some impact from disruptions caused by the coronavirus pandemic, analysts say.

"Japanese banks' costs are high in the sense that bank management should cut them given that they don’t have an outlook for revenues going back up anytime soon," said Michael Makdad, senior equity analyst at Morningstar. "So they should cut branches and employees to reduce fixed costs even if that affects revenues, because revenues are going to be low in any case."

The cost-to-income ratio, which measures operating expense as a percentage of operating income, is used to gauge banks' efficiency and productivity. Lower ratios generally indicate higher efficiency and profitability, but factors such as a bank's business model and size can affect the ratio.

Among the region's 38 largest banks by assets that disclosed cost-to-income ratios for the quarter ended March 31, six of the 10 least efficient lenders were Japanese. That includes the nation's three megabanks — Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc.

Fukuoka Financial Group Inc. reported the highest cost-to-income ratio on the list, rising to 77.48% from 55.24% in the previous fiscal first quarter. The Japanese regional bank group merged with another local bank, Eighteenth Bank Ltd., last year, leading to a jump in operating costs.

Toyoki Sameshima, a senior analyst at SBI Securities Co., said the Japanese banks have been suffering from "low fees" from lending amid a slow economy and ultra-low domestic interest rates. And some of them have sought to expand operations amid slowing business growth, but consolidations with their peers in or outside Japan have been pushing their overall costs higher.

MUFG, which had the second highest cost-to-income ratio on the list of 71.84%, has said cost reduction is one of its goals to achieve in the long term. It said it plans to reduce jobs by about 6,000 and branches by about 40% between March 2018 and March 2024.

With the fourth-highest ratio of 69.37% on the list, SMFG has said it aims to reduce expenses by eliminating 6,000 jobs and streamlining its branches over the next three years.

At the other end of the spectrum, China's Bank of Beijing Co. Ltd. reported the lowest cost-to-income ratio of 16.27% as of March-end, improving from 20.1% in the previous year.

It was followed by 17.1% for Bank of Shanghai Co. Ltd. and 19.35% for Industrial & Commercial Bank of China Ltd.

"China banks enjoy the low cost-to-income ratio mainly due to the economies of scale, as each branch normally serves a [wider] population in China," Cindy Wang, an analyst DBS Group Research, said.

She added China's generally lower cost-to-income ratios will be sustainable, as fintech capability will help reduce physical branches and operating costs.