Top 1000 World Banks - Chinese banks continue to dominate cost-to-income rankings

Mirroring The Banker’s Top 1000 World Banks ranking, China’s banks dominate not only by Tier 1 capital but by cost-to-income ratios too. Naturally, caution over numbers must be exercised for both measures, but based on publicly available figures more than half of the top 20 cost-to-income ranking names are Chinese – as they were in the 2017 ranking.

Shanghai Pudong Development Bank leads the pack, with a 23.86% ratio – a slight improvement on 2017’s ranking thanks to operating income rising faster than operating costs.

China Construction Bank and ICBC follow, with just a few percentage points between them, both having improved on the 2017 ranking. The faster pace of China’s economic growth in 2017, which coincided with better global conditions, helped its banks’ results. The government’s tougher efforts to deleverage the economy, however, might restrain growth in 2018 and affect local lenders’ profitability and efficiency ratios in the immediate future.

Russia’s Sberbank has also improved. Its 32.45% ratio pulled it up the list to ninth place, from 12th, to wedge it between China Everbright Bank and Bank of China. Better economic data, after a nearly two-year recession, also helped the Russian lender.

Australia is the second most represented country in the ranking, with four names. This is just over one-third of China’s tally. 

In 13th place, Westpac showed a 37.45% cost-to-income ratio and is immediately followed by Commonwealth Bank and National Australia Bank. ANZ is a few steps down, in 18th position (between them are Lloyds Banking Group and Banco Santander).

In 16th place, Lloyds’ ratio, at 41.82% in this year’s ranking, has been steadily declining since 2014. After being bailed out during the financial crisis, the UK lender finally exited close to a decade’s state ownership in 2017.

While also an improvement, Santander’s 41.91% was closer to its previous efficiency quotient. The Madrid-based Latin American specialist benefited from a better performance in its overseas markets, particularly Brazil, which finally exited a dire recession in 2016. That year, the country became the largest income contributor to the group and in 2017 this grew by a significant margin, placing Brazilian profits well above that of all other markets.

If operating costs had not also risen by a relatively large amount – a factor in this was the acquisition of ailing Banco Popular in Spain – the group’s efficiency ratio would have likely dropped by more than the 0.42 percentage points recorded here. Spain’s other major bank, BBVA, is also on the list at 19th, with a 43.57% ratio.

Italy’s Intesa Sanpaolo is the world’s 20th most cost-efficient bank. Its improvement is notable as it shed 8.89 percentage points off its cost-to-income ratio, to 46.43%, after years of constant rises. Plagued by large pools of non-performing loans and a stagnant economy, performance has been patchy in recent times even for Italy’s largest banks. Intesa’s income was boosted extraordinarily in 2017 by state funds received in relation to its taking control of failing Banca Popolare di Vicenza and Veneto Banca. 

Best cost-to-income ratios of the Top 20 banks worldwide