Salary and related compensation for employees is one of the largest components of expense for a bank. This isn't an unexpected result, especially given the often notorious nature of press banks receive for yearly bonuses and pay for management. Comparing salary to revenue provides an industry benchmark with some insightful cyclical properties.
In general, the ratio rises during the beginning of a recession through the early stages of the business cycle. Once it hits a peak, it steadily decreases until the the cycle repeats.
The most recent cycle has shown a very steady curve, although with calls for a recession in the coming years the decreases in the coming quarters could be rapid.
In terms of cycle timing, two questions about the ratio may help determine the future trend:
Will the pace of the ratio decreases continue at the same rate, accelerate, or slow?
Will the ratio return to the lows seen before the previous three recessions?
Both of these items will be important to watch as the business cycle continues into the later stages.