Banks' efforts to improve efficiency are paying off. At the top 100 bank holding companies, efficiency ratios - a measure of how much it costs a bank to generate $1 of revenue - have been improving dramatically.

The average for the group is 57.40% for the first nine months of this year, compared to 59.44% in 1995. (See chart below.) And that's down from nearly 62% in 1994.

Bankers and analysts said two factors explain the improvement - a continuing focus on expense reductions as well as boffo profits that boosted the revenue side of the equation.

Many banks long respected for their efficiency remain in familiar positions in the top 10, including Valley National Bancorp, First Bank System Inc., Bank of New York Co., and Fifth Third Bancorp. The top slot - with an astonishingly low 39.54% ratio of gross operating expenses to revenues - went to North Fork Bancorp. on New York's Long Island. This is the first year the company appears among the top 100 banking companies, a reflection of both its growth and continuing industry consolidation.

Wells Fargo & Co., the San Francisco giant that bought First Interstate Bancorp this year, fell precipitously in the rankings, from No. 9 last year to 41 for the first nine months of the year. Its efficiency ratio worsened from 54.97% last year to 56.58% for the first nine months of 1996.

Indeed, the efficiency of banks that have been involved in the largest mergers in the last year of so was often less than stellar. Chase Manhattan Corp., PNC Bank Corp., and Fleet Financial Group Inc. all were ranked in the bottom 50.

Summit Bancorp and First Chicago NBD Corp. are a couple of notable exceptions. Both were involved in big mergers in the last 18 months and are ranked among the top 20 in efficiency.

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