ICBC

While state-owned banks are making the headlines in the country ranking, the city banks are leading the way in performance. Kimberley Long reports.

China’s city banks have scored highly using The Banker’s best-performing bank methodology, demonstrating areas of strength despite the country’s slowing economic growth.

Yet the Chinese banking is experiencing a period of divisions, as the country’s biggest banks continue to see their Tier 1 capital soar, while smaller institutions battle with the impact of lockdowns and contagion fears from the troubled real estate sector.

China’s poor economic results, which saw gross domestic product increase just 0.4% year-on-year in the second quarter of 2022, outlines how tough the ongoing pursuit of its zero Covid-19 policy is on the country. With major hubs like Shanghai back under lockdown, manufacturing and retail spending alike dropped significantly.

The strength of the state-owned Chinese banks is unparalleled on a global scale. China’s megalenders have held on to their positions at the head of the Top 1000 World Banks ranking. But there is some movement within the top 10, as Bank of Communications (BOC) climbs up the Top 1000 ranking to 10th place; now, five of the top 10 global banks for Tier 1 capital are Chinese.

Shenzhen Rural Commercial Bank (SRCB) comes out on top in the 2022 best-performing table, moving up from 12th spot last year. Moving up four positions to 41st in the country ranking, the bank’s turnaround in fortunes follows Singapore’s DBS Bank buying a 13% share of SRCB in April 2021.

SRCB ranked within the top 10 across five best-performing categories, with the highest spot being second place for asset quality. The bank grew its asset base by 15.9%, to $92.13bn. The bank also placed in the top 10 for profitability, return on risk, soundness and leverage. However, the bank fell far short in the growth, operational efficiency and liquidity results, where it placed 31st, 46th and 61st, respectively.

China Merchants Bank (CMB) held fast to its second position in the overall best-performing table. The bank had a strong year, keeping its sixth position in the country ranking and climbed up to 11th place in the Top 1000 ranking, coming close behind BOC and making it a possible contender for a place in the global top 10 in 2023. CMB took first place for profitability and return on risk, but failed to break into the top 10 in any of the other categories. The bank’s lowest result came in operational efficiency, where it placed 61st.

Bank of Beijing leapt up the best-performing table from 61st in 2021 to third place today. It placed second for leverage and third for soundness. Other interesting results came from Qishang Bank, which placed first for growth after a 33.6% increase in Tier 1 capital.

Bank of Jinzhou (BOJ) took first place for operational efficiency, with the highest score in the best-performing table of 8.18. Yet the bank has placed 90th overall, after placing 48th in 2021. BOJ’s second-highest result was 18th for growth, yet it was close to the bottom in the other categories. BOJ needed People’s Bank of China intervention after experiencing difficulties. In July 2019, state-owned Industrial and Commercial Bank of China (ICBC) became the largest shareholder in BOJ, with further shares acquired by other state-backed investors.

Of the biggest banks in China, ICBC — which boasts more than $500bn in Tier 1 capital — came in ninth place in the overall best-performing table. An improvement on the joint-19th place the bank saw in 2021 alongside Bank of Zhengzhou. ICBC’s highest ranking is eighth place for return on risk, while its worst result is 74th for growth.

There are, however, indications that the Chinese banks performance is declining compared with previous years. The overall scores of the banks fell, with top placed SRCB scoring just 5.39 compared with the 6.37 seen by 2021’s best-performing lender, Hangfeng Bank. A score of 5.39 would only be enough to see a bank rank in 90th place in the 2021 ranking. Additionally, CMB needed just 5.30 to earn second place, against the 6.11 it recorded in 2021 for the same spot.

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