Turkey's largest lender by assets has ranked as the least cost-efficient among major European banks in the first quarter, S&P Global Market Intelligence data shows.

State-owned Türkiye Cumhuriyeti Ziraat Bankasi AS registered a cost-to-income ratio of 126.16% at March-end. The ratio gauges efficiency by measuring operating expenses as a proportion of operating income. First-quarter operating expenses at the bank jumped 586% to 35.41 billion Turkish lira from a year earlier, including 20 billion lira in nonrecurring cost.

Turkish banks have faced headwinds from unpredictable regulatory changes and increasing funding costs, and state-owned lenders have explicitly removed profit targets from their strategies.

Germany-based Norddeutsche Landesbank Girozentrale (NordLB) recorded the second-worst efficiency ratio among the banks in the sample at 113.64%. It reported a loss in the first quarter.

Some large banks in Switzerland and France registered worsening cost-to-income ratios in the first quarter.

UBS Group AG logged a ratio of 82.46%, up 5.23 percentage points from three months earlier. Its operating expenses for the quarter rose 9% year on year to $7.21 billion, driven by an increase in provisions of $665 million related to US residential mortgage-backed securities litigation.

The Swiss bank said it expects to book roughly $17 billion in costs from its state-brokered acquisition of Credit Suisse Group AG based on preliminary estimates — $4 billion in provisions for potential legal and regulatory risks as well as a negative impact of $13 billion from fair value adjustments of the combined group's assets and liabilities. However, the transaction is also expected to result in negative goodwill of $34.8 billion.

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France-based BNP Paribas SA, Europe's second-largest bank by assets, recorded a cost-to-income ratio of 76.39%, an increase of 6.42 percentage points from 2022-end. It incurred higher operating expenses of €9.19 billion in the first quarter, which included an €897 million contribution to the Single Resolution Fund. The ratios of domestic peers Groupe BPCE, Société Générale SA and Crédit Agricole Group also climbed over the quarter, ranging between 66% to 79%.

Germany's Deutsche Bank AG registered an improved efficiency ratio of 71.05%. In April, the lender said it will cut 5% of its senior back office staff as it raised its cost-savings target by €500 million to €2.5 billion.

The Nordic region's top lenders continue to be the most cost-efficient banks in the sample. Denmark-based Nykredit A/S had the lowest cost-to-income ratio of 31.65%, followed by Norway's DNB Bank ASA with 32.96%. Sweden-based Skandinaviska Enskilda Banken AB (publ), Swedbank AB (publ) and Svenska Handelsbanken AB (publ) also clocked in relatively low ratios of between 37% and 42%.

Italy's Intesa Sanpaolo SpA and UniCredit SpA and Spain's CaixaBank SA and Banco Bilbao Vizcaya Argentaria SA all recorded improved cost-to-income ratios, as did UK-headquartered HSBC Holdings PLC.

On a country-by-country basis, banks headquartered in Switzerland, France, Denmark, Belgium and Finland recorded higher average cost-to-income ratios in 2022 than in 2021.