Top 250 EU Banks ranking: Few bright spots

The UK’s HSBC tops The Banker’s Top 250 EU Banks ranking by Tier 1 capital. HSBC’s Tier 1 capital grew by 8.21% to $151bn during 2012 – a reflection of the bank’s efforts to comply with new capital requirements, as well as its strong financial performance. The bank also claimed the top spot according to two other key indicators – it posted the highest profits ($20.7bn) and the largest assets ($2690bn) of all EU banks.

There are four UK banks in the Top 10 banks by Tier 1 capital and three French banks. Spain’s Banco Santander, Germany’s Deutsche Bank and Italy’s UniCredit occupy the remaining three spots. Taken as a whole, French banks performed better than UK banks during 2012. French banks in the Top 250 posted pre-tax profits of $23.3bn and an aggregate return on capital (RoC) of 7.07%, compared with UK banks, which posted pre-tax profits of $19.9bn and an aggregate RoC of 4.32%.

Several UK banks posted dramatic poor results in 2012. Barclays’ profit fell by 95.73% to $388m, while RBS lost $8.32bn. RBS has not filed a profit since 2008.

Suffering continues

The top 10 by Tier 1 capital increase table is mainly populated by western European banks that have undergone big recapitalisations; Spain’s Banco de Valencia, Belgium’s Dexia, Portugal’s BPI and Greece’s Piraeus Bank Group have all been bailed out by high-profile injections of state capital. 

With the exception of a few lenders, Spain’s banks are some of the worst performers in this year’s Top 250 European Banks ranking; accounting for five of the top 10 banks by Tier 1 capital decreases. Three of the five – Banco Grupo Cajatres, Liberbank and Bankia – were formed as a result of the merger of Spanish savings banks or ‘cajas’, but are still struggling to resolve poor legacy assets. Aggregate losses for Spanish banks in the Top 250 totalled $74bn in 2012.

While many western European banks continue to post huge losses and high non-performing loan (NPL) ratios, central and eastern European banks continue to boost their capital levels and record improved profits.

The Netherlands' Home Credit, with operations focused on eastern Europe and other emerging markets, was a standout performer, ranking first by growth in assets (125%), and posting the highest return on assets (6.84%) and third highest RoC (59.40%).

At the other end of the rankings, several Danish banks are noticeably present in the top 10 assets decrease, top 10 lowest RoC and top 10 lowest RoA tables. This is due to the fact that many are suffering the effects of the burst property bubble and an economy that is teetering on the edge of recession. Unsurprisingly, the latter three tables are also peppered with banks from countries hardest hit by the eurozone debt crisis: Italy, Greece, Portugal and Ireland.

Heavy losses

Slovenia’s banks also performed poorly as high NPLs continue to erode their Tier 1 capital ratios. The country’s largest bank, Nova Ljubljanska Banka (ranked 117th), posted a NPL ratio of 28.2% and a 3.76% reduction in Tier 1 capital to $1.28bn, while the second largest bank, Nova KBM, recorded an NPL ratio of 22.21% and a 14.6% reduction in Tier 1 capital to $466m.

Banks from Slovenia in the Top 250 posted a contraction of 34.95% in RoC during 2012 – making it one of four European countries to post an RoC contraction of more than 30%, according to The Banker Database. It was joined by Greece (-36.13%), Spain (-34.12%) and Ireland (-32.46%).

In stark contrast, banking sectors in eastern Europe posted the highest RoCs, with Poland claiming the top spot (20.83%), while Hungary posted an RoC of 15.98% and Romania 11.68%. Sweden’s banking sector also performed well in this regard – posting an RoC of 17.03%.

Other European countries with smaller banking systems (with less than $1bn of Tier 1 capital) that performed well in this year’s ranking were Malta with an aggregate RoC of 25.47%, the Czech Republic (24.73%) and Latvia (19.27%).