While Asia-Pacific, western Europe and North America continue to account for 90% of the Tier 1 capital in the Top 1000, Asia is continuing to eat into western Europe's share. Brian Caplen reports.

Global structure 2017

For the second year running, total profits of the Top 1000 banks have fallen. From a peak of $992bn in our 2015 ranking, the total fell to $974bn in the 2016 ranking, and in the latest one is down to $962bn. This is a moderate reduction, and probably a reflection of a slow-growing world economy and the impact of tougher regulation.

At the same time, total Tier 1 capital has continued on an upward trajectory that began after the financial crisis. The latest figure is $7374bn – up $273bn on the 2016 ranking, and three times the $2377bn held before the crisis in the 2004 ranking.

As a result of higher capital and lower profits, return on capital is also slightly down at 13.04% compared with 13.71% in the 2016 ranking and, again, much lower than the returns being made before the financial crisis.

In terms of the global structure, this year’s results show another tilt away from Western Europe and towards Asia. Banks in the Asia-Pacific region (including China and Japan) now account for a 42.51% share of global Tier 1 capital, up from 41.25% in last year's ranking. There are also more players from this region in the Top 1000.

While the number of Japanese banks in the ranking is down from 90 to 86, there are seven additional Chinese banks (126 compared with 119 previously) and five more from the rest of Asia-Pacific (168 compared with 163 previously).

By contrast, western Europe did not see many banks fall out of the ranking but it has seen slippage in its share of Tier 1 capital. This falls to 26.04%, down from 28.25% – a drop of more than two percentage points and larger than the corresponding increase in Asia. The number of western European banks in the ranking has fallen by just two to 218.

Not much has changed in terms of global banking’s concentration in the three main regions of Asia-Pacific, western Europe and North America. Together they make up 90.1% of the total universe with North America’s share staying roughly the same at 21.55% (21.32% previously). The number of banks from North America is exactly the same at 179.

The rest of the world accounting for the remaining 10% of Tier 1 capital consists of Africa, central and eastern Europe (CEE), the Middle East, and Latin America and the Caribbean.

Of these, Africa’s share is the smallest and has even fallen slightly to a mere 0.78%, a peculiar result considering how fast the economies of some African countries are growing. The number of banks from Africa in the Top 1000 has fallen to 29 from 34. Some of this poor showing may be due to currency weakness.

Latin America and the Caribbean region increases its share to 3.28% (up from 2.75% in the 2016 ranking) with the number of banks up three to 75. The Middle East’s share stays roughly the same at 4.24% (but with nine fewer banks) and CEE’s share is 1.6% with five more banks. 

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