Share the article
twitter-iconcopy-link-iconprint-icon
share-icon

Top 1000 World Banks – Asia-Pacific and North America pull down loan to deposit ratio

The trend in falling loan-to-deposit ratios continued in the 2016 Top 1000 World Banks ranking, as the aggregate ratio dipped.
Share the article
twitter-iconcopy-link-iconprint-icon
share-icon

The trend in falling loan-to-deposit (LTD) ratios continued in the 2016 Top 1000 World Banks ranking, as the aggregate ratio dropped by 1.94 percentage points to 85.3%. This marks a contrast to 2015’s ranking, when the LTD ratio dropped by only 0.95 percentage points, the smallest decline in years. However, whereas in the 2015 ranking banks worldwide declined across the board, in this year’s ranking the fall can be specifically attributed to two regions: Asia-Pacific and North America.

LTD

The fall was most pronounced in the Asia-Pacific region, where the LTD ratio shrank by 2.93 percentage points relative to the 2015 ranking, to 70.98%, confirming the region’s status as least dependent on loans worldwide. This can partly be attributed to the growing number of Chinese institutions in the ranking – two new Chinese lenders appeared this year, bringing the total to 119 – which routinely maintain low LTD ratios.

The decline was nearly as large in North America at 2.29 percentage points, bringing the aggregate LTD ratio for the region down to 74.58%. Local banks have the second lowest exposure to loans globally, partly because capital markets are the preferred form of corporate funding in North America, depressing the demand for loans significantly. This is especially visible at the big four US banks – JPMorgan, Bank of America, Citigroup and Wells Fargo – which have ratios ranging from 66.48% for JPMorgan to 77.57% for Bank of America, considerably lower than their European peers.

The Middle East was another region that showed a decline, 2.45 percentage points, bringing the local ratio down to 80.96%. However, as Middle Eastern countries hold only 3.25% of the total loans in the ranking, while Asia-Pacific and North America hold 42.32% and 14.72%, respectively, the region’s impact on the global figure was smaller.

These drops in LTD ratios were enough to counter growth in LTD ratios elsewhere. The growth story this year comes from western Europe, where LTD ratios soared by 8.54 percentage points to 120.37%. In recent years, the region has mostly seen local lenders deleveraging their balance sheets, but after the ratio inched higher in the 2015 ranking, Europe is finally showing signs of a recovery. This also seems to be the case with the neighbouring region, central and eastern Europe, where the LTD ratio grew by 7.53 percentage points to 118.2%.

Western Europe also supplanted Latin America and the Caribbean to have the largest LTD ratio globally. Local banks in Latin America showed an increase of 0.46 percentage points in this year’s ranking, bringing the aggregate ratio to 114.52%, the third largest global total. This could indicate a slowdown in the build-up of debt in Latin America, which has taken place over recent years. In 2011’s ranking, the local LTD ratio for Latin America and the Caribbean was 98.94%. Now that countries that previously acted as growth engines in the region – Argentina, Brazil and Venezuela – are struggling, the ratio could come to a standstill, or even fall, in the future rankings.  

The LTD ratio in Africa also received a boost in this year’s ranking, by 5.79 percentage points to 82.46%, and some African banks now have ratios above 125%.

Was this article helpful?

Thank you for your feedback!