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Top 1000 World Banks – New arrivals from the US soar

The dollar’s resilience has helped the US produce a large number of new arrivals in the 2016 Top 1000 World Banks ranking, while healthy numbers of European and Asian banks have returned to the list.
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The 2016 Top 1000 World Banks new arrivals list is notable for the dominance of US lenders. Of the 33 institutions in the 2016 table, 16 come from the US, while the next largest national representations are from the UK, Panama and Venezuela, each with two banks in the table. To put these results into perspective, the cumulative total of US lenders in the new arrivals table in the 2013, 2014 and 2015 editions of the Top 1000 World Banks ranking is also 16.

New arrivals

Underscoring this dominance is the fact that according to their 2015 annual results many US lenders enjoyed a strong year by most performance indicators. Total assets, pre-tax profits and Tier 1 capital were all up year on year. The relative strength of the US economy during the review period goes some way to explaining this, as does the strength of the US dollar at a time when some emerging market currencies have been subject to volatility, meaning that the diverse range of markets seen in the 2015 new arrivals ranking is less evident.

This is also the first edition in which smaller US banks have reported their Tier 1 capital positions in accordance with Basel III regulations. In previous editions of the Top 1000 World Banks ranking, these lenders had employed Basel I metrics. As such, the growth in the number of US institutions in the 2016 new arrivals ranking is a notable accomplishment given that the definition of Tier 1 capital is more strict under Basel III.

Among the top five lenders in the new arrivals table, the two from the US were Flagstar Bancorp, which ranked 540th globally and with $1.44bn in Tier 1 capital, and Midland Financial Co, which ranked 604th globally with $1.19bn in Tier 1 capital. Outside the top five, US banks dominated the new arrivals table from seventh place to 15th, with only one non-US bank in the mix.

Not counting the performance of the US banks, first, second and third position in the new entrants ranking went to lenders from Japan, India and South Korea, respectively. Japan’s Kyushu Financial Group, which took the number one spot, is the new holding entity created from the merger between Kagoshima Bank and Higo Bank in 2015. Facing stiff competition, a cooling market and stricter regulation, the two formed the Kyushu Financial Group which now occupies 213th place in the global rankings.

The second largest new arrival, with $2.01bn in Tier 1 Capital, is India’s IDFC Bank. The lender was created in 2015 following the approval of a demerger from IDFC Limited, a non-bank public finance company which effectively spun off its lending activities into a discrete banking entity. This is the first time that an Indian lender has featured in the new arrivals ranking since the 2013 edition. IDFC Bank is now ranked 427th globally.

Elsewhere in the ranking, two UK lenders have appeared for the first time since the 2014 edition. Sainsbury’s Bank, which came in at number nine on the new arrivals table, achieved a global rank of 803. Meanwhile, Metro Bank was ranked 27th in terms of new arrivals and 969th globally. The appearance of Metro Bank, co-founded by US businessmen Vernon Hill, is a positive sign of the bank’s growth in the face of developmental challenges.

Other western European lenders in the table include Switzerland’s Glarner Kantonalbank and Norway’s Skandia Banken. The latter is Norway’s first completely digital bank and it successfully executed an initial public offering on the Oslo Stock Exchange in November 2015, valuing the lender at $573m according to reports from Reuters.

The only Middle Eastern lender to feature in the new arrivals ranking for 2016 is Lebanon’s Bank of Beirut and the Arab Countries. This brings the total number of Lebanese lenders in the Top 1000 World Banks ranking to 10, highlighting the strength and depth of the country’s financial services sector. Only one Lebanese bank posted a year-on-year decline in Tier 1 capital in this year’s global rankings.

From Latin America and the Caribbean, Panamanian banks Multibank and Global Bank Corporation, alongside Venezuela’s Banplus and the Dominican Republic’s Banco BHD Leon (BHDL), are the only regional representatives in the new arrivals ranking. This is the same number as in the 2015 ranking and a marginal reduction from the five banks from the region that appeared in the 2014 new arrivals table.

BHDL affirmed its position as the Dominican Republic’s second largest private sector bank following a merger with Banco Multiple Leon in July 2014. As such, the 2016 rankings are the first edition in which BHDL, operating as a merged entity, has reported full-year figures. This merger has put BHDL at a global ranking of 911th and 17th place in the new arrivals table.

Panama’s Global Bank Corporation has continued its positive growth trajectory of recent years by entering the Top 1000 World Banks ranking at position 981. As noted by ratings agency Fitch, the lender has enjoyed robust profitability growth, outperforming the Panamanian average, while showing similar strength in asset growth and asset quality. In tandem, Global Bank’s capital position is now on the rise, putting it in the new arrivals table at 32nd.  

Meanwhile, the welcome back table, which recognises banks making a return to the global ranking, is a geographically mixed affair. A total of 20 jurisdictions are represented this year, compared with 15 for the new arrivals table.

A glance at the welcome bank ranking by region reveals nine lenders from Europe, four from Latin America and the Caribbean, 11 from Asia, five from the US and eight from the Middle East, including Iran. Bank Rossiya is the only Russian lender making an appearance in the table for 2016.

Welcome back

Chinese banks lead the welcome back table with seven lenders in total, while Iranian banks take second place with six lenders in the table. That most of the entrants from these two markets achieved significant capital positions – above $1bn – means that their inclusion is probably linked to the renewed availability of their financial data.

For example, China’s Bank of Dalian featured in the Top 1000 World Banks ranking in 2013 at 434th with Tier 1 capital of $1.7bn. In the 2016 edition, the bank has improved markedly and re-enters the rankings at 329th with Tier 1 capital of $2.82bn. Similarly, Iran’s Bank Melli was last featured in the 2013 edition of the global rankings at position 541 with Tier 1 capital of $1.15bn. In 2016, Bank Melli has re-entered at 394th with $2.18bn of Tier 1 capital.

A number of banks in the welcome back table have appeared after posting a positive turnaround in their results. Slovenia’s Abanka, ranked 941st globally in 2016, is one example of this trend. After securing a government bailout in 2013 and merging with state-owned lender Banka Celja in October 2015, Abanka has posted positive results according to most performance metrics and boasts a Tier 1 capital base of $491m in the 2016 ranking.

Italy’s Istituto Centrale delle Banche Popolari, which was acquired by private equity groups Bain Capital, Advent International and Clessidra in 2015, is another lender that has returned to the global ranking based on solid increases to its Tier 1 capital position.

Both the new arrivals and welcome back tables reveal a relatively healthy banking sector across a number of jurisdictions. Though US banks dominate, there is nevertheless sufficient global representation to show that new players continue to enter the global rankings, while efforts to reform and revive stressed banks in the wake of the financial crisis are beginning to bear fruit. 

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