Top 1000 World Banks 2010
Many Western banks are rebounding from the huge losses of 2008 and have strengthened their grasp on the top of the rankings, but elsewhere the pain is just beginning. Philip Alexander reports.
New World Order
Forty years after BankAmerica topped The Banker’s first global bank rankings in 1970, the US-based bank has once again taken the number one spot in 2010. While Bank of America, JPMorgan and Barclays all participated in 1970 and 2010, this 40th anniversary of the listings shows that much else has changed in the sector. The Banker’s editor emeritus Stephen Timewell reports.
Europe’s big guns feel crisis impact
Last year, the financial crisis had little impact on the top 25 western European banks. This year, there are the first signs that the ultimate winners and losers from the crisis will lead to some reconfiguration of the European banking scene, albeit at a glacial pace. France’s Crédit Agricole slides out of the top three for the first time to be replaced by BNP Paribas. Not only has BNP Paribas increased its Tier 1 capital by 55.8% as it absorbs parts of the Fortis group, but a small 2.6% rise in its assets now makes it the largest bank in the world by assets.
The return of the state
Looking at this year’s Top 25 central and eastern European (CEE) banks, one could be forgiven for thinking the region’s transition to a market economy had gone into reverse. The largest privately owned bank in the region, Hungary’s OTP, slips from three to five, numerous other private banks also slide down the rankings, and almost all the new arrivals in the Top 25 are state-owned, including Ukraine’s Oschadbank and State Export-Import Bank (Ukreximbank). In addition, the inclusion of Kazakhstan in this list, omitted last year, sees Kazkommertsbank (KKB) and Halyk Bank take eighth and 13th places, respectively. The Kazakh government took stakes of more than 20% in both banks during the financial crisis.
China’s growth story shows no sign of relenting
Every year the Top 1000 Banks ranking delivers new and startling insights into the creeping dominance of the Chinese banking sector and this year does not disappoint. The rankings mark two milestones for the country’s banks: first, China can this year claim the highest ranking for any Asian bank, with heavyweight Industrial and Commercial Bank of China (ICBC) at last surpassing Japan’s Mitsubishi UFJ Financial Group to claim the number seven spot globally.
Japanese decline continues despite profitable 2009
Despite pulling itself out of the worst recession the country has seen since the Second World War, Japan remains a deeply troubled economy saddled with a fiscal position that has in recent months gone from bad to worse: indeed, so parlous is Japan’s predicament that in June the country’s new prime minister, Naoto Kan, warned that the once mighty Asian economy may be staring a Greek-style public debt crisis in the face.
Watch
In the run up to the publication of The Banker’s Top 1000 World Banks ranking, Guillaume Hingel, research manager of The Banker talks to Brian Caplen, editor of The Banker about the data methodology of this year’s Top 1000, as well as the wider impact of the financial crisis two years on and how emerging market banks are better positioned than Western banks to withstand its effects.
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Mixed results beyond China
It has become something of a cliché that China’s banks are the biggest and beefiest in Asia, dominating the top 25 Asian banks ranking in recent years. Perhaps more interesting, however, is the Asian ranking without China’s heavyweights.
Sober times rein in US banks
An almost frenzied focus on boosting capital in 2009 has meant that Bank of America (BOA) leapfrogged JPMorgan Chase in this year’s rankings to become the world’s biggest bank by Tier 1 capital.
Brazilian and Mexican banks maintain Latam lead
Financial crises or not, Brazilian banks have been consistently climbing up the rankings of the world’s most solid lenders for the past decade. Whether state-owned or in private hands, they have taken advantage of the country’s large and fast-growing market. Their ambitions are also growing and the top lenders are now planning to expand to serve Brazilians in neighbouring countries as well as the US.
Gulf banks still on top despite difficult year
In response to last year’s regional crises concerning Dubai World and the defaults by two Saudi business conglomerates, a number of Middle Eastern banks are beginning to recapitalise. Irrespective of those difficulties, Gulf-based banks maintained their dominant position among Middle Eastern banks. Banks based in the Gulf Co-operation Council (GCC) states – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates – account for 58 of the 90 Middle Eastern banks featured in this year’s Top 1000 rankings.
Africa’s promise remains despite turbulent year
Unsurprisingly, following the end of a period of high economic growth throughout the continent, 2009 represented a more sober year for Africa’s banks.
China takes a big lead in inaugural BRIC ranking
For the first time in the history of the Top 1000 banks listing, The Banker magazine is providing a ranking of the top 25 banks found in the vibrant BRIC (Brazil, Russia, India and China) economies in order to see how these growing giants fare when measured in terms of their banking system Tier 1 capital.
Smaller banks dominate soundness rankings
Once again in the Top 1000 rankings, the banks with the highest capital-asset ratios (CAR), and thus the banks on the soundest financial footing, have tended to be smaller banks, both from the developed and developing world. France’s Electro Bank led the field, as it did last year, with a CAR of 87.47%; this compares with an average CAR of about 6% to 7% for the world’s biggest banks. Of the top 25 soundest banks, 18 are from emerging markets. This reflects the more conservative nature of banking in these regions, owing to higher perceived risks.
Chinese provincial banks rise up the rankings
In previous years, The Banker magazine has published a list of the top 25 highest movers ranked according to the number of places they have jumped up the table. This measure has historically illustrated an institution’s progress relative to that of its peers.
US leads new entrant charge
Analysing banks’ balance sheets across the world and finding a comparable figure for their Tier 1 capital across jurisdictions and accounting definitions is a demanding task. Accessing lenders’ financial statements can, however, be even harder.
Asia leads the way as profits make a return
Whereas last year North American and European banks were busy racking up losses, in this year’s figures profits have returned to all regions. Asia accounts for the largest share of profits at 37.08%, with Europe accounting for 31.19% and North America 13.78%.
Levy confirms trend towards more deposits
The world average loan-to-deposit ratio has fallen to 87.35% from close to 100% last year as deleveraging of the banking sector continues. One major impact of the financial crisis is the shift back to deposits as the major source of bank funding, and future regulation and taxation policies may push this trend along even further.
Asset quality challenge intensifies for world banks
With the onset of the financial crisis, The Banker has focused much more of its Top 1000 data gathering on asset quality. This year, a total of 179 banks supplied comprehensive data on their levels of impaired assets, compared with 142 last year. While this still accounts for only 18% of total banks in the Top 1000, it is sufficient to begin to understand global trends in asset quality.
Capital ratio takes huge leap
The recovery in pre-tax profits to assets and pre-tax profits to Tier 1 capital ratios are a sign of a return to more healthy levels in the aftermath of the crisis.
BIS ratios point to recovery but NPL worries linger
Signs of a general recovery in banking include the facts incurring losses are not recording them on the same scale as last year and that even the lowest Bank for International Settlement (BIS) capital ratios are higher than in 2009. The worst non-performing loan (NPL) percentages, on the other hand, are higher, suggesting that there is more pain to come.
Tightened belts loosen due to income crisis
Over the past two decades, as banking in many countries has moved from being an activity performed chiefly in the state sector to one done mainly in the private sector, the emphasis has been on costs, efficiency and shareholder returns.
