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 |