On the brink: the banks just outside the Top 1000

While The Banker's Top 1000 World Banks ranking published every July gives an insightful and unique snapshot of the state of the global banking market, our ranking of those banks featuring just below the ranking gives an excellent indication of the way in which the market is heading, and which countries and regions are on the rise.

TABLE-Bubblingunder

Following on from its Top 1000 World Banks 2012, which ranks global banks by Tier 1 capital and was published in the July issue of the magazine, The Banker has compiled a list of the largest banks that fell just outside of the Top 1000 ranking. The 1000th ranked bank in 2012 posted Tier 1 capital of $284m. 

In previous years, this list has tended to be dominated by the more developed markets of North America and Europe. Therefore this year the data has been divided geographically to show the top 25 contenders from each region, in order to provide a more panoramic overview of up-and-coming banks from across the globe.

The data is based on 2011 year-end results and as a result, banks that have better levels of disclosure and more timely reporting practices are more likely to be included. The Banker is still in the process of updating its database with many hundreds of financial results. While African banks have proven to be more efficient at publishing results than in the past, reporting delays are still more apparent among these lenders, especially those from north African countries that have been impacted by the Arab Spring. Therefore, significant lenders in this region might have been excluded.

As The Banker examines Middle Eastern banks in greater detail in its annual Top 500 Islamic Financial Institutions ranking published in November, these banks are not included in this listing. Therefore, this bubbling under ranking captures a total of 150 banks.

Africa emerges

The standout story from this year's Top 1000 contenders ranking is the impressive performance of African and Latin American (Latam) banks. Both African and Central and South American lenders posted the highest return on assets (RoA) ratios, with aggregate average figures of 2.45% and 2.39%, as well as 27.41% and 25.88% for their respective return on capital (RoC). Banks from these regions are recording noticeable volumes of lending because of the untapped growth opportunities in both markets.

Africa is arguably the rising star of this year’s bubbling under data. In particular, African banks stand out for their impressive profitability indicators – with banks from the continent comprising 10 of the lenders in the global top 25 RoC table. African banks also constitute 11 of the top 25 banks in the RoA table. Equally impressive is the fact that only one lender in the top 25 African banks table posted a pre-tax loss – the $4.99m recorded by South Africa’s Ubank.

The bubbling under data also shows that Africa and the Latam markets have the highest number of foreign-owned subsidiaries – a respective eight and seven each. It should be expected that these numbers will grow in the coming years as international institutions home in on these markets.

Within Africa, the emergence of smaller banking markets is becoming more apparent, with Uganda, Namibia, Ghana and Ethiopia making their presence felt. The Latam region also has a number of markets showing strongly; the five banks from regional powerhouse Brazil are joined by four from Venezuela.  

It is worth noting that Caribbean lenders are included in the Latam region ranking, and Jamaican lenders are notable for occupying the two highest positions in the global top 25 RoC table. National Commercial Bank Jamaica ranks first with an RoC of 78.16%, while Scotiabank Jamaica occupies the second position with a figure of 77.18%.

Asian contraction

Asian banks – the biggest growth story in the Top 1000 ranking – posted an aggregate return on assets of 1.15% in the bubbling under listing, just less than half that of African and Latin American banks. 

table2 bubbling under

Some south-east Asian markets have also slowed down, which was somewhat inevitable given the huge profits they previously turned in. These markets had undergone a growth spurt and so this pace of growth was unlikely to be sustained. Added to this, they are facing growing competition.

Unsurprisingly, western European banks do not show the same promise. Whereas Africa and Latam each have only one lender in their top 25 regional tables that posted a negative RoA, there were five European lenders that posted a minus figure – a sign that even smaller banks are struggling to generate profits. Furthermore, nine out of the top 25 recorded a negative percentage change in Tier 1 capital. There is only one western European lender in the top 25 assets growth table – Banca Privada D’Andorra in 18th position.

Scaling up

Comparatively speaking when it comes to the developed markets, the smaller North American lenders have fared better than their western European counterparts. This is, to a large degree, a reflection of the clean-up work carried out in the US by the Federal Deposit Insurance Corporation. Its efforts have paid off as the North American region has achieved an aggregate RoA of 1.08% and a RoC of 10.48% – considerably higher than the respective figures posted by Europe of 0.13% and 1.89%, which are in fact the lowest among all regions.

Indeed, with the smaller North American banks featured within the top 25 table boasting a Tier 1 capital range of $281.89m to $241.59m, the prospects look good for these banks to make it into the Top 1000 ranking in 2013. It is a similar story with banks in the Asian top 25, for which Tier 1 capital ranges from $281.5m to $225.45m.

While the top echelon of African banks appears to be approaching the threshold for entering the Top 1000 ranking – number one ranked Crédit Agricole Egypt holds Tier 1 capital of $281.71m, for example – the vast majority still have some way to go. For example, the 25th ranked bank, Zimbabwe’s CBZ Holdings, recorded a Tier 1 figure of just $50.8m. Such comparatively low figures are a clear measure of the room for growth in the African market. Meanwhile, Latam banks look more poised to make an impact on next year's Top 1000 ranking; the top five have Tier 1 capitals ranging from $280.94m to $271.26m. 

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