The 2018 Top 1000 Banks rankings reveal a more even distribution of the profits pie.

After sliding over the previous 24 months, global pre-tax profits jumped 15.6% to reach $1112bn in 2017. The Top 1000 banks’ collective return on equity (ROE) – the best yardstick of profitability – jumped to 11.82%, at the upper end of the 10% to 12% bracket that banks typically strive for. Furthermore, the biggest moves from loss to profit in the 2018 rankings are more than four times the size of the previous ranking’s best recoveries. 

As with capital, profits in every region and major market are up from (or broadly on par with) the 2017 rankings. Even Japanese banks, whose margins continue to suffer under the Bank of Japan’s long-running negative interest rate policy, improved profits by 7.6%. In central and eastern Europe, the Middle East and China, profits were outpaced by capital and asset expansions, so their ROE and return on assets (ROA), another key profitability metric, have dipped a few basis points.

Asia Pacific still generates the lion’s share of global profits, but Europe’s recovery means there is a more even distribution of the profit pie. Its share has soared to 20.3%, a five-year high and just four percentage points shy of North America

That said, North America is the region to watch next year. Profitability at all Canadian banks in the 2018 ranking spiked at least 15%. Their collective ROE is a whopping 16.92%, while their ROA and return on capital far exceed the global average. In 2018 their peers south of the border will start reaping the benefits of a boost in business activity thanks to the US corporate tax rate being slashed from 35% to 21%.

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