The best of the best are celebrated as The Banker crowns the global Bank of the Year, and hands out the laurels for our regional winners and the lender that has excelled the most when it comes to financial inclusion.

Global and Asia-Pacific: ICBC

According to The Banker’s Top 1000 World Banks ranking, published every July, Industrial and Commercial Bank of China (ICBC) is the world’s number one bank in terms of assets, profits and Tier 1 capital. The bank achieved a net profit of Rmb262.97bn ($42.96bn) in 2013, a year-on-year increase of 10.2%. This unparalleled growth has also been matched with continuous diversification, innovation and expansion, domestically as well as abroad.

“Such achievements in our business performance benefited from the general growth trend and enormous potential of China’s economic fundamentals, as well as from the bank’s unswerving adherence to the commercial bank’s basic principles and business philosophies, its commitment to its strategies, as well as its continued efforts to enhance its innovation capacity in the fast-changing market environment,” says ICBC chairman Jiang Jianqing.

ICBC’s global footprint is increasing rapidly, and now includes 331 overseas institutions across 40 countries. The net profits of ICBC’s overseas operations (excluding the investment in Standard Bank) and domestic comprehensive subsidiaries rose by 52.2% and 76.2%, respectively, in 2013.

In Africa, ICBC has become the largest shareholder of Standard Bank. The Chinese bank now has operations in 19 African countries, which makes it well placed to continue servicing the large foothold that China has in Africa via its outward direct investments.

ICBC’s role as an offshore renminbi clearing bank is also proving important, with its Singapore branch becoming the first offshore clearing centre for the currency designated by the People’s Bank of China. The branch cleared Rmb2600bn in 2013 alone. ICBC’s offshore renminbi clearing services have also expanded elsewhere globally, with the lender being chosen as the clearing bank for Canada and Luxembourg.

At home, ICBC has contributed to the fruition of the country’s initiative in pushing domestic firms to internationalise and ‘go global’. ICBC issued Rmb8700bn-worth of loans throughout 2013, up by Rmb974bn from the previous year. 

In seeking to support Chinese firms’ growth, ICBC has shown a great appetite for innovation in its corporate banking services. It explored supply chain finance among other new business models, which effectively achieve both risk control and better financial services for micro and small businesses. The bank also ventured into debut financial leasing, short-term financing bonds, medium-term notes and syndicated loans.

Technological advancement has also been a factor in ICBC’s recent success. In 2013, the bank launched an e-business platform integrating online shopping, online financing, consumer credit and consumer microfinance, all based on direct purchases and small and medium-sized merchant loans in real trade.

Although ICBC is still expanding its branch and ATM networks – by the end of 2013 ICBC had 17,245 domestic branches and 329 overseas physical outlets – the growth in its online transactions is exceptional. The number of e-banking transactions accounted for 80.2% of ICBC’s total in 2013. The bank has 21,825 self-service banking outlets and 80,501 ATMs, overall.

Personal banking with ICBC has also become comprehensively digital. Personal internet banking now covers all mainstream mobile terminal operating systems, including Windows 8, iPad and Android.

ICBC has also managed to successfully diversify its offering, particularly through its non-banking services. The bank has explored collaborations in social insurance, healthcare and transportation and has carried out marketing among law offices, accounting firms and other customers.

“ICBC has kept enhancing its financial services, it has continued to propel reform and innovation as well as business transformation, and it has strengthened its risk prevention and control in response to the growing demands of the real economy. ICBC has achieved ‘steady progress’ in terms of the overall performance,” says Mr Jiang.

Western Europe: Banco Santander

After some challenging years for western European economies, light appears to be emerging from the end of the tunnel. Growth in gross domestic product in the eurozone is expected to reach 0.8% in 2014 after 2013’s 0.5% contraction.

Despite these headwinds, The Banker’s Bank of the Year 2014 for western Europe, Banco Santander, posted a strong improvement in profitability. Net profits at group level nearly doubled from €2.3bn in 2012 to €4.4bn in 2013, with return on equity rising by 2.51 percentage points to 5.42%.

Over the course of 2013 and 2014, banks in western Europe have been preoccupied with preparations for the European Central Bank’s (ECB’s) comprehensive assessment and the asset quality review of the European Banking Authority, the results of which were published in October. 

“This is a symbolic year for European banks due to the rigorous and demanding comprehensive assessment, and the beginning of the single supervisory mechanism,” says Javier Marín, CEO at Banco Santander. “We could not be prouder to have been named Bank of the Year in western Europe in 2014. The ECB assessment results endorse Santander’s management model, based on prudent risk taking and conservative provisioning.”

At the end of 2013, Santander had a common equity Tier 1 (CET1) capital ratio of 10.4%. In the ECB’s stress tests of 2014, Santander’s baseline scenario CET1 ratio for 2016 was projected at 12%, while the ratio for the adverse scenario was still at 8.9%.

Santander has proved its ability to maintain a high degree of recurrence in revenues in the years of crisis and is one of three large international banks that has not suffered a single quarterly loss between 2007 and 2014, according to Mr Marín. 

Apart from in its home market Spain, where Santander won the domestic Bank of the Year award, it also won the country award for Portugal. Santander’s operations in the UK and Germany were also strong contenders for the respective domestic awards. Santander operates in Poland through Bank Zachodni and is active throughout the Americas.

“Santander’s strategy is focused on being simpler and forging lasting and value-added relationships with customers to improve its linkage, which makes them more satisfied and encourages them to work more closely with us,” says Mr Marín.

Central and Eastern Europe: Raiffeisen Bank International

Austria’s Raiffeisen Bank International (RBI) is The Banker’s Bank of the Year 2014 for central and eastern Europe (CEE). Despite yet another difficult year for banks in CEE, RBI reported €557m of net profits in 2013. This may be 23.6% lower than in 2012, but is still significantly above its Austrian peers.

Furthermore, RBI’s extensive CEE network again picked up five country awards for operations in Bosnia-Herzegovina, Croatia, Kosovo, Romania and Serbia. Apart from home market Austria, RBI operates banks in 15 countries, as well as leasing branches in Kazakhstan and Moldova.

“In 2013, RBI was once again the most profitable bank in Austria and at the beginning of 2014 it successfully completed its €2.78bn capital increase,” says Karl Sevelda, RBI’s chief executive.

All European banks were focused on the European Central Bank’s asset quality review in 2014 and have had to work on their non-performing loans as well as provisions. For banks with CEE or Russian operations, 2014 turned out to be an even tougher year due to the crisis in Russia and Ukraine, with related sanctions on Russia and negative impacts on Ukraine’s economy. Meanwhile, the general macroeconomic environment in the region was already difficult and bank levies in Hungary meant banks incurred additional costs.

For RBI this meant that net provisioning requirements for 2014 were increased in September to between €1.5bn and €1.7bn, largely due to higher expected risk costs in Ukraine. Overall, RBI says that it expects a negative result for 2014 and a consolidated profit in the mid triple-digit millions for 2015.

“We continue to pursue our strategic priorities systematically: namely by strengthening our capital position, concentrating on highly promising areas – in terms of markets and business divisions – and focusing on cost reduction and increased efficiency,” says Mr Sevelda. “Corporate customers will continue to make up the backbone of our business; at the same time, we continue putting more emphasis on the retail business.”

Out of the 18 countries RBI has operations, the bank has picked six focus countries: Austria, the Czech Republic, Poland, Romania, Russia and Slovakia.

Americas: Itaú Unibanco

Going from strength to strength, Itaú Unibanco has not only established itself as a dominant player in its home market, Brazil, it has also successfully expanded its operations across Latin America, in corporate, retail and investment banking. Its $3bn takeover of CorpBanca was not only the largest banking acquisition of recent years, it made Itaú the fourth biggest lender in Chile and the fifth largest in Colombia, where Santiago-based CorpBanca also has operations.

“We’re very happy about [the CorpBanca] transaction, it is very important for our future in Chile and Latin America; with this we become an important bank in two countries in the region [outside of Brazil],” says chief executive Roberto Setubal. 

“Our international strategy is to become a regional player. We want to have a presence in most important countries in Latin America. This includes Mexico, Colombia, Peru and Chile, [as well as] Argentina, Paraguay and Uruguay, which are part of the Mercosur [sub-regional trade bloc].” 

The Banker recognised Itaú’s achievements in its home market as well as its recent success in Paraguay and Uruguay, awarding the lender three individual Bank of the Year awards.

Itaú has indeed become a powerhouse in the region. It couples deep knowledge, experience and relationships in key markets with the ability to serve large corporates abroad, thanks to its operations in New York, London, Tokyo, Hong Kong and the Middle East. “We plan to be a bank that connects the region with the world, serving flows between investors, [foreign companies] and Latin America,” says Mr Setubal.

Being Latin America’s bank of reference is ambitious. Competition with global players is fierce as regional corporates intensify international trade and expand abroad. Multinationals moving to Latin America may wish to rely on the extensive networks of these international lenders. Mr Setubal is quick to acknowledge this, but is also confident in Itaú’s offering, which includes a deep understanding of its markets.

“We are a solid bank, with good capabilities. I think we can serve clients in different ways [to international banks] as we can leverage our operations in other countries in the region, especially in local currencies. When we talk about local knowledge, specialisation in the region, we are very strong,” he says.

Middle East: Qatar National Bank

When it comes to successful banks, the Middle East, and in particular the Gulf region, has them in abundance. Yet, few lenders, even within the Gulf states, could match the impressive strides taken by Qatar National Bank which emerged as the winner for the Middle East’s regional Bank of the Year award. While the usual key performance indicators were noteworthy, including a return on equity of 21.3% in 2013 and a cost-to-income ratio of 20.4%, it was QNB’s successful international expansion that was the defining feature of this year’s entry. 

“QNB now operates in more than 26 countries and across three continents. Our vision is to become a Middle East and Africa icon by 2017,” says Ali Ahmed Al-Kuwari, acting chief executive of QNB. This ambition has seen the bank successfully push into the kind of larger, higher growth markets that will be required to sustain its upward trajectory over the longer term. 

“In line with this objective, we acquired a 23.5% stake in Ecobank Transnational Incorporated in 2014. As a leading pan-African bank with a presence in 36 countries across the African continent, this strategic partnership is a significant milestone in QNB’s expansion plans. At the same time, we continued to reinforce our presence in Asia’s markets by upgrading our presence in China and India and exploring representative office locations in other key locations,” says Mr Al-Kuwari.

In conjunction with the development of its international footprint, QNB has maintained its competitive edge by strengthening its product offerings in key markets. QNB First, an affluent, priority banking offering, has now been launched in Oman, Indonesia, Kuwait, Sudan and Lebanon. To build on these launches, QNB created its First Global Recognition programme to act as a concierge service for QNB First customers globally. 

Nevertheless, with QNB representing 45% of Qatar’s domestic banking market, its home economy will continue to play a vital role in the coming years. “The ongoing economic transformation and rapid growth of the Qatar economy will continue to provide opportunities. Our strong relationships in the corporate sector, our broadening loan book to support the diversification taking place in the country and our evolving and well-received retail offering will all further consolidate our strong domestic franchise,” says Mr Al-Kuwari.

Africa: United Bank of Africa

The pan-African banking model has had a rocky ride in recent years, with its leading lights plagued by losses or governance issues. Yet if United Bank of Africa’s (UBA’s) year is anything to go by, it has begun its return to the straight and narrow.

The Nigerian bank went into loss in 2010 and 2011 as the world economy slumped and some poor loan decisions came home to roost. It came back strongly in 2012, when it was able to write back some of its provisions. Last year, gross earnings improved by 20% to N264.7bn ($1.53bn), while net operating income grew 11% to N176.9bn. But provisions and an increased tax burden left profits after tax down 15% at N46.6bn. 

Some 25% of UBA’s revenues now come from outside Nigeria. Performance in its home market was negatively affected by regulatory changes – restrictions on bank charges and an increase in the cash reserve ratio on public sector deposits from 12% to 50%. 

“Regulation is a factor which has continually impacted the global banking industry and our operations are not exempt from its reach,” acknowledges Phillips Oduoza, UBA’s CEO. “However, our strong risk management and compliance functions have enabled us to mitigate their effect on our operations and performance.”

That said, the group has made a good start to its three-year Project Alpha plan “to regain industry leadership”. Its deposit base grew by 25% and its loan book by 40% in 2013. Its cost-to-income ratio improved from 64.8% in 2012 to 60.9%, while its overall net interest margin inched up from 5.8% to 5.9% in this time.

The group is now present in 19 African countries, including Nigeria, and has won this year’s Best Bank award in four of them. “Our main success in the past year has been the growth witnessed in our different operating countries,” says Mr Oduoza. “We are currently experiencing increased uptake of our products in addition to key customer acquisitions. This is great for the bank as it provides a strong platform for future growth.”

UBA’s ambition is to become Africa’s global bank, and one of Project Alpha’s objectives is to increase the focus on African trade, alongside more participation in growth areas such as agriculture and infrastructure.

Financial inclusion: National Development Bank

This year’s Financial Inclusion award saw a range of entries from financial institutions of all sizes. The entries were varied, with a number of initiatives that impressed the judges. This included Citi’s micro-loan programme for legal permanent residents in the US who need to borrow the $680 to fund their application for US citizenship.  

In another strong entry, Argentina’s BBVA Francés, demonstrated how its scholarship integration programme combined financial inclusion with helping young people finish their high school education. And Barclays Zambia had a number of initiatives including its financial inclusion ‘Banking on Change Programme’ that it organised in partnership with Plan International Zambia. 

However, the entry that most impressed the judges was from Sri Lanka’s National Development Bank (NDB). A case study looking at the financing of the cinnamon industry demonstrated a real need for financing and how its impact can potentially benefit Sri Lanka’s economy as a whole.

NDB’s financing supported an industry that already existed and was underserved, and it was strategic in the sense that the cinnamon industry has the potential to be developed to the point where cinnamon is associated with Sri Lanka by consumers all over the world. 

Sri Lanka’s cinnamon once held best-in-class status and the government has a vision of reviving the industry. But the farmers lived in poverty and did not have access to bank financing, which was preventing them from growing their business further. NDB committed to strengthening the supply chain of the industry with financing, which in turn helped some farming communities on their way out of poverty. 

The bank’s microfinance programme ensured that even the poorest farmers would be eligible for financing. The loans are repaid over three years – the time it typically takes for cinnamon to mature – and go towards cultivating the land and working capital. The bank also helps its microfinance customers become financially literate in the process.

NDB is also helping efforts to develop the cinnamon industry so that it can become internationally renowned again. This includes educating those working with cinnamon about the other end products that contain the spice, such as aroma oil and cinnamon powder, and encourage the growers to focus on such value-added products.

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