Between 2009 and 2019, assets at Chinese institutions have grown enormously at a compound annual growth rate (CAGR) of 15.76%. The figure for US banks are a much smaller 2.74%.
However, the US crushes China when it comes to pre-tax profit growth, with a CAGR of 23.74% over 2010 to 2019, compared with China’s 13.24%. US pre-tax profits in 2009 were heavily negative, making the turnaround all the more impressive.
A closer look at ROA, which shows profits earned against a bank’s resources, illustrates how the US’s stellar profit growth eventually outpaced China’s faster asset growth advantage in 2016. The 2018 US tax break only cemented this lead. In the 2019 ranking, it clocks in at an average ROA of 1.54% based on pre-tax profits and 1.24% based on net income, compared with 1.07% and 0.89% in China, respectively.
Despite a continued higher tax burden, growth in net income for US banks between 2014 and 2019 has been at a much faster pace of 9.72% CAGR, compared with a 2.76% CAGR over the same period for Chinese banks. Banks may be bigger in China, but US banks appear to be much more efficient institutions.
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