Steaming on: Panama's good economic prospects, aided by the expansion of its canal, have seen the country's banks thrive
All but three of the Top 75 central American banks remained in profit last year according to The Banker's ranking, with Panama recording stand-out results. Writer Silvia Pavoni
In such volatile times for the financial sector, strong branding is more important than ever. The Banker's Top 500 Banking Brands listing ranks the leading brands. Brian Caplen reports.
As the central bank of Russia tightens capital requirements, the country's Top 50 banks look set to continue accumulating capital and assets at the expense of smaller players. Writer Philip Alexander
Using hard data to gauge which international finance centres are leading the world, The Banker's ranking tables make for some fascinating - and often surprising - insights. Writer Silvia Pavoni
The Banker's Top 100 African Banks ranking shows Nigerian banks chipping away at the dominance of their South African counterparts, a situation that will look very different once the recent bailouts in the west African country are taken into account. Writer Charlie Corbett
Although the pre-tax profits of Latin American banks have slipped, Tier 1 capital figures have grown by 14% and Brazil has firmly held onto its regional dominance. Writer Silvia Pavoni
Badly hit: London's financial sector was one of the biggest sufferers of the credit crunch
Although the top 10 EU banks retained their solid grip on the 2008 ranking, profits were significantly down across the board and capital structures were seriously damaged compared with banks in other parts of the world. Writer Stephen Timewell
Standing strong: China has continued to grow as a financial centre despite the global economic turbulence
The growth of the Asian banking sector continued in 2008, with China building on its dominance in the region, dwarfing India's more modest growth path, while South Korean banks' share declined. Writer Geraldine Lambe
Although not unaffected by the global financial crisis, the Arab banking sector has continued to expand, with the UAE banks accounting for a growing proportion of asset growth. Writer Stephen Timewell
Supported by a series of government measures, China's banks recorded a surge in growth in 2008 despite the global credit crisis. Writer Charles Piggott
Although challenged by adverse economic conditions and increasing competition in the market, on the whole Taiwan's banks managed to record modest profit growth during 2008. Writer Charles Piggott
In The Banker last month, we brought our readers up-to-date statistics on the world's Top 1000 banks. This issue, our editors provide analysis of this year's key trends and snapshots of some of the countries featured.
Confidence in and respect for the banking system are increasingly rare sentiments among the general public, but Canada's banking system has managed to achieve both. A survey by the Canadian Bankers Association (CBA) earlier this year revealed that 91% of Canadians are confident that their deposits are secure, while 92% agree that the strength of Canadian banks is critical to the health of the country's economy.
The fragmentation of Germany's banking sector remains its dominant characteristic: the $10,360bn in assets recorded in this year's Top 1000 for the country are held across 82 separate banks. This is in striking contrast to the UK, where $11,267bn assets are held by 15 banks, or France, with $8745bn among just nine banks.
Last year might have been one of the worst on record for the financial sector but not all countries experienced a downturn. Indian banks confounded the downward trend with an average annual increase in 2008 pre-tax profits of 20.4%. Furthermore, not one of the 32 Indian banks in Top 1000 rankings made a loss in 2008.
Iran's banks were somewhat insulated from the global financial turmoil affecting the developed world. Although profits across the sector remained relatively static in The Banker's Top 1000 listings this year, a boom in Islamic financing has added much-needed ballast to banks' bottom lines. Iranian banks now hold $235bn of sharia-compliant assets, which makes up 37.5% of total sharia-compliant assets worldwide.
The Lebanese banking sector has proved itself to be resilient to the wider global malaise in international finance. After the collapse of Lehman Brothers in late 2008 and the subsequent government takeover of major lending institutions in the US and the UK, Lebanese depositors lost confidence in foreign banks. As a result, funds have been pouring into the country's local banks, which are enjoying record levels of profits and liquidity. These inflows allowed Lebanese banks to boost their lending to the domestic economy by $5bn last year, and as this year's Top 1000 rankings show, assets are significantly up.
Despite the international financial troubles and its shrinking economy, Mexico's banking sector presents a relatively stable and optimistic picture. Assets in its top five banks grew on average by 50% in 2008, and although profitability has significantly declined these banks all closed the last financial year in profit.
The tidal wave of the financial crisis has not spared Europe - and The Netherlands is one of the European countries caught by the ripcurl. None of its banks have escaped unharmed: pre-tax profits and return on equity (ROE) shrank across the board; in some cases dramatically.
Nigerian banks have had a solid, if unspectacular, year since the publication of The Banker's Top 1000 global bank rankings in 2008. Collapsing commodity prices and the drying up of external financing, due to the global economic recession, have taken their toll on the sector. Despite this, the Nigerian banking sector as a whole boosted its total pre-tax profits substantially in the calendar year 2008 to $3bn, from $1.9bn in calendar year 2007.
Of the Russian banks in this year's rankings, two stand out for the right reasons: Alfa Bank and Bank Vozrozhdenie. They enjoyed real profits growth in 2008 of 30.2% and 19.5%, respectively.
Less than 10 years after one of the worst financial crises in Turkey's history - a crisis during which more than 20 banks were acquired by the state - Turkish banks appear to be weathering the international financial storm with remarkable resilience. Despite the global banking crisis, annual inflation of more than 10% and a 30% drop in the value of the Turkish lira against the US dollar, not one of Turkey's 11 largest banks made a loss in this year's Top 1000 ranking.
In the financial crisis, UK banks have split into two distinct camps. In the first, are those that have felt the full brunt of the crisis and posted record losses, led by Royal Bank of Scotland and HBOS. In the second group, are the relative winners in the crisis, who have also thus far avoided the worst effects of the recession, including the Co-operative Bank, Abbey and Bank of London & the Middle East.
Venezuela has grabbed many headlines in recent months, ranging from national and international political diatribes, to drug wars, to president Hugo Chavez's intrusion in private sector deals.
At their annual meeting last month, the Caricom heads of state struggled to make headway on trade and immigration restrictions, although one issue which was met with unanimity was climate change. Writer Brian Caplen
Despite huge losses, Western banks have retained their dominance of the rankings due to massive capital raising. But what will the future hold? Geraldine Lambe reports
Research by Valentina Lorenzon, Cecile Sourbes and Charles Piggott
In a ranking that was expected to show a new order of the world's banks, the positions held by the strongest European lenders are surprisingly unchanged. The top three institutions in western Europe are still HSBC, Crédit Agricole and Royal Bank of Scotland. The only difference is that now it is the UK government-owned bank RBS that leads the list, with nearly $102bn in Tier 1 capital, a 14.5% increase since last year's figure.
Two themes dominate the changes in this year's rankings compared with 2008. First, the heavy sell-off in the currencies of many central and eastern European countries, including Russia, Hungary and Ukraine, has reduced Tier 1 capital in dollar terms. Second, liquidity crises and the revelation of high non-performing loan (NPL) ratios on portfolios that had not previously been tested in an economic downturn has brought a number of banks close to collapse, knocking them out of the Top 1000 altogether.
In what came as a shock to many exuberant analysts, China's juggernaut economy slowed dramatically in the last months of 2008 with annual gross domestic product growth falling to 9.4% compared with 11.4% for 2007. The World Bank's recent forecast for 2009, which puts the Asian titan's economic output at a mere 7.2%, has been buoyed by a strong stimulus package of some $586bn.
Immediately after the collapse of Lehman Brothers, market watchers predicted an era of renewed vigour for Japan's conservative banking sector. As Nomura swiftly moved to snap up Lehman Brothers' European and Asian businesses and Mitsubishi UFJ Financial Group (MUFG) took a 20% stake in Morgan Stanley, it seemed the Western subprime crisis had presented well-capitalised Japanese banks with a golden opportunity to realise much-needed global growth through cheap foreign acquisitions.
For most of 2008, Asia's burgeoning economies managed to sidestep the worst of the global financial crisis. In the very latter stages of the year, however, a global dollar shortage conspired to devalue several regional currencies just as Western demand for Asian exports slumped to a disastrous low: heavily export-dependent economies, in particular South Korea and Taiwan, have been badly hit, with gross domestic product in emerging Asia, excluding India and China, plummeting some 15% in the final quarter of 2008, according to the International Monetary Fund (IMF).
The US has been at the heart of the financial crisis. Of total losses of $1040.7bn in the financial sector worldwide, the US accounts for more than half, at $582.6bn. Of the top 10 worst losses during the crisis, six of them are from the US. Between them, banks in the top 10 of the North American ranking have lost a staggering $473.66bn since the crisis began. In 2008, the 152 US banks present in the Top 1000 made a pre-tax loss $91,078m.
The top Latin American banks are, as usual, headed by Brazilian lenders. And it is in Brazil that the biggest growth story took place last year. Banco Itaú and Unibanco merged in November 2008, forming the largest bank in the country.
The Middle Eastern banking sector has remained relatively isolated from the worst of the crisis in the financial markets, but its banks are being hit indirectly by the wider global economic downturn and plunging commodity prices, in particular oil.
African banks have so far been relatively insulated from the wider financial crisis, and results for calendar year 2008 reflect this. However, with plummeting commodities prices and a dearth of foreign external financing so far in 2009, next year's results might not look so rosy.
A high capital/assets ratio usually reflects a healthy business model and a good financial strength. For the seventh time in a row, France-based Electro Bank tops the soundness ranking with a ratio of 86.91%. Banco Exterior in Venezuela, a new entry to the Top 25, comes in second at 82.89%. Another new arrival, Banco Severo-Vostochny Alliance in Russia, is ranked third with 56.86%.
Recent negative headlines associated with Iran have overshadowed the more positive news surrounding the country's banking sector. Five of Iran's banks entered the highest movers category in this year's Top 1000, with the Export Development Bank of Iran topping the list. The bank leaped 579 places from 867 in last year's rankings to 288 this year. Its Tier 1 capital increased from $327m for calendar year 2007 to $2.1bn for year 2008. Bank Saderat Iran, Bank of Industry and Mine, Bank Pasagard and Bank Melli Iran also made it onto the list of highest movers. The boom in Islamic financing has undoubtedly benefited the sector, with Iranian Banks accounting for $235bn, or 37.5% of total sharia-compliant assets.
It is unsurprising that two of the US's biggest former investment banks take the top two spots in this year's list of new entrants. Both Goldman Sachs, which enters the Top 1000 in 13th place, and Morgan Stanley, which enters at 17th place, were forced to take commercial banking licences at the end of 2008. How long the two iconic Wall Street brands will remain in the rankings is another matter. Many are speculating that the banks will seek to shed their commercial bank status as soon as the economy and financial markets pick up.
This year's Top 1000 ranking, based mostly on results for the 2008 fiscal year, reflects the impact of the global financial crisis, with a huge 85.3% decrease in global profits, down to $115bn. On a regional basis, the highest drop has been registered in the US, where profits accounted for 14% of the aggregate figure last year and represent -79% of the total this year. On the other hand, Middle Eastern (20% of total), Latin American (15%) and Japanese (14%) banks have performed well and have significantly increased their contribution to the global result.
This year's Top 1000 survey has reinstated the loan-to-deposit ratio as a measure of bank liquidity. Loan-to-deposit ratios had been largely overlooked in the past two decades as banks relied more heavily on sources of funding other than deposits.
In recognition of the fact that bank balance sheets have become more complicated in recent years, The Banker has added to the range of indicators it uses to measure asset quality in this year's Top 1000 survey. Our 2009 questionnaire asked banks to report not just the percentage of non-performing loans (NPLs) to total loans, but also the total value of impaired assets on their balance sheets under the guidelines outlined in international accounting standard IAS39.
The financial crisis seems to have encouraged the continuous growth of Asian banks and the declining presence of US and EU lenders, creating a gap between the new and the established banking regions. Asia, excluding Japan, is represented by 193 banks in the world ranking, nine more than last year and 19 more than two years ago. Banks from the 'Rest of the World' category also showed up in higher numbers, making a particularly big jump from last year. There were 33 two years ago, 36 last year and 49 in this year's ranking. Although relatively small in absolute terms, their increased presence is indicative of the growing influence of developing economies and their financial institutions in the listing.
Since the advent of the financial crisis, regulators and analysts have been highly focused on capital. But capital is by no means the only element that needs to be considered in drawing conclusions on a bank’s health.
The Banker collects cost/income ratio data from banks as a measure of efficiency among banks across the globe. While methodology among banks across regions varies and there are regional variations in what is included, The Banker endeavours to provide a global picture, but this is determined by banks' approach to this measure.
Many of the world’s top financial brands took a beating in 2008, but not every bank suffered. The Banker’s Top 500 Banking Brands listing puts a financial value on the leading brands and ranks them accordingly. Philip Alexander reports.
Steaming on: Panama's good economic prospects, aided by the expansion of its canal, have seen the country's banks thrive
