China stays in pole position with strong Tier 1 capital and profits
Asia is riding high as the world’s saviour, taking up the slack from an ever-weakening US economy. Its main vulnerability is its dependence on increasingly expensive oil to continue developing, and the inflationary pressures affecting the price of food.
These vulnerabilities pose a series of political challenges, with riots becoming more common; economic challenges, as subsidies eat into state coffers; and development challenges, as gross domestic product growth no longer pulls people out of poverty and into a consuming middle class.
China, which is set to stage the Olympics this summer, once again dominates the list of the Top 25 Asian banks. China’s ICBC, Bank of China and China Construction Bank (CCB) take the top three positions in the regional ranking. Each of them achieved a Tier 1 capital increase in 2007 compared with the previous year. The biggest rise was at CCB, with Tier 1 capital increasing from $42,286m to $52,300m, followed by ICBC with a rise from $59,166m to $66,271m.
Although the brakes are being put on the Chinese economy by the central bank and by the slowdown in some of its major export markets, it is still forecast to grow at nearly 10%, compared with 11.4% in 2007.
China’s Bank of Communications rose from number 10 in the global ranking last year to fifth position this year, with Tier 1 capital of $16,451m, pushing Australia’s ANZ Banking Group down to sixth position.
As for profits on capital, China’s banks showed strong figures, with a rise to 27% in 2007 from 18% in 2006. The other Asian banks performed well too – if not so spectacularly – with India’s banks’ profits on capital rising to 21% from 18% in 2006, Korea’s up to 23% from 21% and Singapore’s up to 21% from 20%.
Taiwan was the only exception, with its banks’ profits on capital falling even further from their abysmal 2006 showing of 0.11% to a negative figure of -17.05%.
Many a Western bank must envy their Asian counterparts, as too must the US banks, whose profits on capital fell to 16% in 2007 from 22% in 2006 and which are undoubtedly facing even larger falls in 2008.
