Banks know the efficiency ratio matters. The harder question is what happens when the push to improve it starts weakening the very revenue base that keeps the ratio healthy in the first place.
That tension runs through a recent ProSight article on efficiency management, which argues that cost control works best when banks stop treating expense reduction and revenue growth as separate conversations. A better ratio can look like progress, but if it depends too heavily on a favorable rate environment—or on cuts that damage service, trust, or customer retention—the improvement may not last.
Here are some key takeaways from the article, part of ProSight’s March 2026 Executive Report “Banking Efficiency and Performance,” which explores how banks are balancing cost-cutting, revenue preservation, and growth priorities:
A better ratio can mask a weaker foundation. The article notes that higher revenue and net interest income can make efficiency ratios look stronger even as expenses rise underneath. But when rates fall and margins tighten, that cover disappears fast. Chad Kellar, an advisory partner at accounting and consulting firm Crowe LLC, said lower rates tend to compress net interest margins and make elevated noninterest expenses harder to ignore.
Banks can cut expenses faster than they can rebuild revenue. That is one of the article’s clearest warnings—and one reason efficiency efforts can backfire if they weaken the customer experience. Graham Tasman, banking industry lead at Grant Thornton Advisors LLC, said, “If online banking goes down or a customer process fails, it creates strong negative sentiment around your services.” He added, “When trust erodes, it can be hard to recover. It’s a brand killer.” Jessica Pinkston, a senior director at banking consultancy Cornerstone Advisors, made the growth problem plain: replacing lost customers is “counterintuitive to growth.”
The smarter starting point is a deeper look at what drives cost and value. Kellar said banks should begin with “their mission, vision, and values,” so they do not end up “cutting things inappropriately.” He called for a more detailed understanding of profitability by product and channel, including “segmenting and analyzing the total cost of ownership of your products and channels.”
Growth and efficiency belong in the same strategy discussion. The article points to Citizens Business Bank as an example of a bank using product fit, cross-sell depth, and a disciplined branch strategy to support both revenue and efficiency. Tasman also argued that AI should not be viewed only as a cost-cutting tool, but as a way to improve service and support revenue growth.
Risk still needs a seat at the table. Kellar called the current environment “the land of opportunity for redesigning operations around the bank,” but added an important qualifier: “What we are saying is that risk needs to be at the table to make sure change happens responsibly and transparently.”
The full article goes deeper on workforce redesign, branch staffing strategy, and the role AI could play in improving both efficiency and revenue. Read it here.
