The Banker’s Top 1000 listing reveals how far some banks are lagging behind their US counterparts in profits and profitability.The Banker’s Top 1000 world banks listing this year may come as a surprise. The fact that the highly profitable Citigroup is by far the world’s largest bank is not a shock but the extent to which US banks as a group stand head and shoulders above the rest of the world in terms of both profits and profitability highlights not only US dominance but also some poor performances elsewhere.

In a tough economic environment with low interest rates, US bankers have good cause to be pleased. The 210 US banks in the listing posted $124.1bn in pre-tax profits in 2002, accounting for a mammoth 49% of the Top 1000 total. US banks’ profits were up a significant 25.7% on the previous year and return on capital rose to 23.2%, from 20.1% previously, as mortgages and consumer finance continue to expand.

The contrast with some other banking markets could not be more stark. In Japan, the aggregate losses of the 114 banks in the listing are still enormous: $39.3bn in the latest year, which is a slight improvement on the $50bn the year before, but there is no end to the losses is in sight.

In Germany, the 83 banks in the Top 1000 could only muster $2.7bn in profits and German banks’ return on capital plummeted to a lowly 6.8%. Partly as a result, European Union (EU) banks’ share of the global profit pie has slid to 43% from 49% last year. Besides raw profits, the cost:income ratios of banks in Japan and the EU have ballooned out to 87.4% and 70.6% respectively, while the US ratio has edged down to 58.8%.

For all countries – and Japan and Germany in particular – a profitable and efficient banking sector is critical to the smooth running of their economies and to growth. For Japan, decisive action is needed to clear the cancer of non-performing loans but the government seems unwilling to show the necessary leadership and so both the banks and the country continue to suffer.

Germany is also impeded by its banking structure; and the removal of guarantees in 2005 adds further pressure. Consolidation is slow, and both low margins and low profitability are not a recipe for success in the 21st century.

The US also has too many banks but consolidation is happening fast among the smaller banks, which is helping to build performance.

Elsewhere, Asian, Middle Eastern and Latin banks could do better – the US banks have clearly demonstrated what can be done.

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