Enabling employees to drive bank effectiveness and efficiency

The Banks’ cost-to-income ratios have risen since the pandemic, reversing a downward trend.

As banks renew their cost optimization efforts, employee productivity is a key battleground. In this report we discuss the performance of cost-efficient banks, and the levers available to reduce cost.

Cost transformation has been elevated to a new level since COVID-19. During the pandemic, there was an understandable shift away from cost reduction to supporting financially-stressed customers. Operational costs rose for a number of reasons — such as enabling work from home, as banks funded both telecoms and hardware for employees, while still bearing the fixed costs of often empty or underpopulated branches and offices.

According to the 200 bank executives surveyed in KPMG International’s recent report New cost imperatives in banking, cost management is rated a “top concern”, with 61 percent saying that cost reduction has become a higher strategic priority since the pandemic. Even though two-thirds of respondents set a cost savings target of more than 10 percent of their cost base between 2021–2024, they also conceded that such aims may be hard to achieve; less than half felt their organizations had achieved previous cost goals. To gain a clearer picture of how banks are tackling cost, KPMG carried out in-depth benchmarking of the cost performance of 60 large banks across the world between 2014–2021. We identify the drivers behind their performance, and discuss how banks can improve their productivity and boost their returns.