The aggregate efficiency ratio for U.S. banks improved sequentially in the first quarter.
The quarter-over-quarter improvement in the industry's efficiency ratio was led by a slight decline in noninterest expenses and a jump in noninterest income.
Efficiency ratios improve
The aggregate efficiency ratio for U.S. banks was 61.9% in the first quarter, down from 63.1% in the linked quarter but up from 60.0% in the year-ago period, according to S&P Global Market Intelligence data.
Despite the improvement for the overall industry, only eight of the top 20 U.S. banks by head count reported a quarter-over-quarter decline in their efficiency ratio, a measure of noninterest expenses divided by net interest income and noninterest revenue. Citigroup Inc. reported the greatest improvement at 14.1% quarter over quarter.
Ten of the top 20 U.S. banks by head count reported a quarter-over-quarter increase in their efficiency ratios, while two remained steady. Among those, Wells Fargo & Co. reported the largest increase at 15.1% quarter over quarter.
Improving income, expense backdrop
A quarter-over-quarter decline in noninterest expenses and a jump in noninterest income helped to drive the efficiency ratio improvement for the sector.
U.S. banks posted $132.8 billion in other noninterest expenses, excluding goodwill impairment and intangible assets, down 0.4% from the linked quarter but up 7.3% from the year-ago quarter. Of the top 20 U.S. banks by head count, 12 reported a quarter-over-quarter decline in noninterest expenses.
Despite pressure on fee-income generating lines of business like mortgage banking, total noninterest income increased by 5.0% quarter over quarter. U.S. banks reported $76.6 billion in total noninterest income in the first quarter, up from $73.0 billion in the linked quarter and mostly in line with the $76.8 billion reported in the first quarter of 2021.
Total net interest income remained steady quarter over quarter, but the industry's total of $138.0 billion in the first quarter was an improvement from $129.7 million in the first quarter of 2021.
Head count
For the second quarter in a row, U.S. banks posted a quarter-over-quarter increase in head count. U.S. banks reported a 0.9% increase in full-time employees quarter over quarter and a 1.0% increase in full-time employees year over year.
Each of the "Big Four" U.S. banks posted a higher head count quarter over quarter. Wells Fargo, which is working through an aggressive plan to cut expenses and bring its efficiency ratio in line with peers, posted its first quarter-over-quarter increase since the second quarter of 2020.
JPMorgan Chase & Co., Citigroup and Bank of America Corp. grew head count by 1.6%, 1.8% and 0.6% on a linked quarter basis, respectively.
