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Top 1000 World Banks - India and eurozone lenders take unwanted crowns for NPLs and CAR

Eurozone and Indian banks top the highest non-performing loan to total loan ratios due to a combination of legacy issues and actions by regulators. Justin Pugsley reports.
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A much-improved economic performance is largely responsible for a reduction in non-performing loans (NPLs) across the eurozone and, barring any major economic upset, the trend is expected to continue. Meanwhile, eurozone regulators are continuing to press banks to clean up their balance sheets more quickly and to build up capital buffers so they are better positioned to withstand the next downturn.

However, eurozone banks still figure prominently in the list of banks with high levels of NPLs, even though many of the bad debt ratios have improved. Cyprus-based Hellenic Bank – with an NPL to total loan ratio of 44.9% – tops the 2018 NPL ranking with the worst ratio. In second place is South Africa-based African Bank, with an NPL ratio of 42.93%.

In the 2017 ranking, the highest NPL ratio was 49.9% and held by Greece’s Attica Bank, followed by Cyprus’s Cooperative Central Bank at 47.31%. In this year’s rankings, eurozone-based banks occupy positions three to eight. This highlights the considerable amount of work still to be done to cut NPLs in the region. Cypriot and Greek banks remain particularly problematic, as they have done for many years.

Among the 25 banks with the highest NPL ratios are 11 Indian banks and 11 from the eurozone, plus one from Bulgaria and two from Africa. NPLs have been rising in India for a number of years and now account for about 11% of total outstanding loans by all banks. According to local media reports, more than 90% of India's NPLs are at state-owned banks, which account for 70% of the country’s banking industry. IDBI is the Indian bank with the highest NPL ratio, at 27.95%, and is in ninth place, followed by Indian Overseas Bank (25.28%) in 10th and UCO Bank (24.64%) in 11th.

Among the reasons why Indian banks figure so prominently in the rankings is because the Reserve Bank of India has forced lenders to take action against defaulters, driving some borrowers into bankruptcy. And some of these bad loans are a legacy of earlier lending decisions, which were not properly assessed for risk.

The Indian government is reportedly considering merging some banks and even setting up a ‘bad bank’ to remove many of these NPLs so bank balance sheets can be freed up to provide credit to viable borrowers. It is also looking to recapitalise the public sector banks, but rating agency Moody’s recently described proposals as insufficient to support credit growth.

Meanwhile, Russia’s Otkritie Financial Corporation Bank stands out for all the wrong reasons on three measures. It had the lowest Bank for International Settlements (BIS) capital ratio at 4.25%, it had the worst profit performance with a loss of $7.52bn and the lowest return on capital at -565.56%. It did, however, avoid the worst performance in terms of capital-to-assets ratios, finishing fourth with a figure of 3.04%. Otkritie was once Russia’s largest private bank and had been expanding aggressively, but in 2017 it was taken over by Russia’s central bank following a run on deposits due to concerns over its loan portfolio.

Nederlandse Waterschapsbank had the lowest capital-to-assets ratio at 2.23%, followed by Japan’s Daiwa Next Bank at 2.87%. Overall, four Japanese lenders rank among the 10 banks with the lowest capital-to-assets ratio.

Italy’s Banca Monte dei Paschi di Siena recorded the second worst profit performance in its 2017 figures with a loss of just under $5.1bn, followed by India’s Punjab National Bank with a loss of $3.05bn. Among the biggest 10 loss-making banks, six are based in India.

Italy’s Unipol Banca made the second worse return on capital (ROC) of -115.17%, followed by Indian Overseas Bank at -89.3%. India-based banks fill eight of the bottom performers when it comes to ROC. Nine of the 10 banks with the lowest BIS capital ratios are Japanese, with Bank of Saga having the lowest ratio at 7.95%, in second place overall.

Highest disclosed non-performing loans (% of loan book)

Rank World Rank Bank Name Country NPL to total loans (%)
1 847 Hellenic Bank Cyprus 44.90
2 892 African Bank South Africa 42.93
3 381 Bank of Cyprus Cyprus 37.00
4 134 Alpha Bank Greece 34.90
5 158 Piraeus Bank Group Greece 34.40
6 175 Eurobank Ergasias Greece 33.40
7 185 National Bank of Greece Greece 32.00
8 248 Novo Banco Portugal 30.50
9 374 IDBI India 27.95
10 581 Indian Overseas Bank India 25.28
11 593 UCO Bank India 24.64
12 741 United Bank of India India 24.10
13 730 Dena Bank India 22.04
14 483 Central Bank of India India 21.48
15 431 Permanent TSB Group Holdings Ireland 21.32
16 680 Bank of Maharashtra India 19.48
17 913 Attica Bank Greece 19.40
18 230 Punjab National Bank India 18.38
19 527 Oriental Bank of Commerce India 17.63
20 899 First Investment Bank Bulgaria 17.33
21 521 Andhra Bank India 17.09
22 696 Banca IFIS Italy 16.99
23 253 Bank of India India 16.58
24 766 Banco Angolano de Investimentos Angola 16.50
25 135 Banca Monte dei Paschi di Siena Italy 16.30

Lowest BIS total capital ratios (%)

Rank World Rank Bank Name Country BIS capital ratio
1 619 Otkritie Financial Corporation Bank Russia 4.25
2 774 Bank of Saga Japan 7.95
3 754 Mie Bank Japan 8.03
4 782 Daisan Bank Japan 8.27
5 793 Michinoku Bank Japan 8.27
6 606 Chiba Kogyo Bank Japan 8.40
7 747 Ehime Bank Japan 8.44
8 789 Kyoto Shinkin Bank Japan 8.55
9 720 Tsukuba Bank Japan 8.60
10 896 Saikyo Bank Japan 8.69

Worst profit performance

Rank World Rank Bank Name Country Pre-tax profits ($m)
1 619 Otkritie Financial Corporation Bank Russia -7516.34
2 135 Banca Monte dei Paschi di Siena Italy -5089.63
3 230 Punjab National Bank India -3051.38
4 374 IDBI India -1921.14
5 56 State Bank of India India -1882.67
6 158 Piraeus Bank Group Greece -1689.70
7 253 Bank of India India -1331.47
8 581 Indian Overseas Bank India -1327.14
9 483 Central Bank of India India -1214.02
10 711 Unipol Banca Italy -1200.08

Lowest return on capital

Rank World Rank Bank Name Country ROC (% latest)
1 619 Otkritie Financial Corporation Bank Russia -565.56
2 711 Unipol Banca Italy -115.17
3 581 Indian Overseas Bank India -89.30
4 374 IDBI India -71.76
5 586 Corporation Bank India -69.80
6 574 Allahabad Bank India -66.51
7 483 Central Bank of India India -63.17
8 230 Punjab National Bank India -56.11
9 527 Oriental Bank of Commerce India -54.34
10 730 Dena Bank India -49.47

Lowest capital-to-assets ratios

Rank World Rank Bank Name Country Capital assets ratio % latest
1 415 Nederlandse Waterschapsbank Netherlands 2.23
2 671 Daiwa Next Bank Japan 2.87
3 228 Fukuoka Financial Group Japan 2.88
4 619 Otkritie Financial Corporation Bank Russia 3.04
5 238 Bank Nederlandse Gemeenten Netherlands 3.05
6 397 BancoPosta Italy 3.06
7 493 Toho Bank Japan 3.32
8 353 North Pacific Bank Japan 3.34
9 557 Munchener Hypothekenbank Germany 3.38
10 868 Saigon Commercial Bank (SCB) Vietnam 3.47

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Read more about:  Rankings & data , Top 1000 World Banks