While recent months have seen much turmoil in the US banking industry, 2022 was a pretty good year for the sector as a whole. The country has added 10 banks to the Top 1000 World Banks ranking, mainly as a result of the strong dollar and consolidation in the sector, bringing its total to 196. Overall, US banks’ aggregate Tier 1 capital grew by 1.55%.
Impressively, 88% of the lenders in the ranking recorded increases in Tier 1 capital. First Citizens BancShares, the largest family-controlled bank in the US, registered the highest growth in Tier 1 (126.1%), following its acquisition of CIT Group in January 2022. The rise in Tier 1 allowed it to jump 155 places in the main ranking to 173rd.
However, Bank of America (BofA) was the only one of the big four banks (also including JPMorgan Chase, Citigroup and Wells Fargo) to expand its core capital base, increasing it by 6.1%. Safra National Bank of New York, a private bank in 879th position in the main ranking, experienced the biggest decline, of 20.99%.
More than 70% of the banks registered an increase in total assets. Texas-based Beal Bank – a wholesale bank founded 35 years ago by entrepreneur Andrew Beal – recorded the biggest increase in total assets (338.4%). Much of the expansion occurred at the medium-sized banks; only one of the big four – Citi – saw growth (5.47%) in assets in 2022.
Texas Capital Bancshares saw the biggest drop (18.19%) in assets. In November 2022, it completed the sale of its insurance premium finance subsidiary to regional bank Truist.
After a bumper year for pre-tax profits (PTP) in 2021, 2022 was a more muted affair. Less than half (47%) increased their PTP and none of the big four managed to do so. Regional lender Cadence Bank, which is ranked 343rd in the main ranking, saw the biggest increase, of 142.73%, whereas 1867 Western Financial Corp, in 910th place, saw the biggest drop, of 80.06%.
However, all 196 banks did record a profit in 2022. In addition, six US banks managed to increase their PTP by more than 100%: Cadence Bank, Beal Bank, Independent Bank Corp, Peoples Bank, Banc of California and Peoples Bancorp. Beal Bank also has the best return on capital ratio (34.51%) and the second best return on assets ratio (4.48%), behind only United National Corporation (14.45%).
Consolidation has been widespread among the regional US banks over the past few years. In addition to First Citizens’ purchase of CIT Group, Old National Bancorp merged with First Midwest Bancorp, M&T Bank picked up People’s United Bank, and Huntington Bancshares bought Capstone Partners and TCF Financial.
Out of the 10 largest US banks, BofA comes out on top in terms of performance, moving up from eighth position in 2022. It took first place in the leverage category, which examines the annual basis point change in a bank’s total liabilities to total assets, as well as fielding strong results in profitability, operational efficiency and return on risk.
JPMorgan Chase comes in second place in the best-performing table, moving up from fourth last year, followed by Truist Bank in third place. The latter, which was formed in December 2019 following the merger of BB&T and SunTrust, moved up from ninth place in 2022 and had a table-topping result in operational efficiency, which looks at the annual change in the cost-to-income ratio.
Capital One Financial Corporation, which was the best-performing bank in 2022, has dropped to seventh position this year, coming in last for asset quality and return on risk but first for soundness, which measures the annual change in capital assets ratio.
While 2022 was a robust year for the US banking sector, this year got off to a shaky start with the collapse of Silicon Valley Bank, the shutdown of Signature Bank and JPMorgan Chase’s acquisition of First Republic Bank. In its US banks report in May, Fitch said that it expects weaker financial performance in 2023 due to the “higher for longer” Federal Reserve interest rate policy and above-average market volatility.
