Top 1001-2000 highlights growing polarisation between the big league and the smaller players
As Japan’s banking sector gets set for a mega-merger, the Banks of the Future listing illustrates the challenge facing emerging markets to strengthen their banks, and by extension their economies.
The Banks of the Future listing of the world’s Top 1001-2000 banks demonstrates dramatically not only the dominance of US and European banks even among the world’s smaller banks but also the paucity of capital available to banks in developing countries trying to grow their economies.
Unlike Lester Thurow’s questioning of the veracity of China’s GDP growth figures in Viewpoint (page 16), the figures in The Banker’s listing (page 80) are unassailable. The US (509) and European banks (289) combined account for 798 of the banks in the Top 1001-2000, 77.9% of the aggregate capital and 74.9% of aggregate assets.
The remaining 202 banks, stretching from Africa (17) to Latin America (59), account for 22.1% of the aggregate capital of $81.4bn, amounting to $18bn. In assets terms, the 202 banks account for 25.1% of aggregate assets of $1152.6bn or $290bn. How do these figures compare? Not too well compared to the world’s largest banks.
The proposed merger of Japan’s Mitsubishi Tokyo Financial Group and UFJ Holdings could create the world’s largest bank with aggregated capital and assets of $58bn and $1,730bn respectively. This one institution by itself is one and a half times the size of all the Top 1001-2000 banks combined in asset terms and six times larger than the 202 banks mentioned above.
In our July Top 1000 world banks listing, we emphasised the growing polarisation taking place, with the top 25 global banks accounting for 37.1% of aggregate assets. In this Top 1001-2000 listing, the polarisation between big and small is further emphasised, especially when it comes to profits. For instance, Citigroup’s pre-tax profits in 2003 of $26.3bn were well in excess of the combined profits of the Top 1001-2000 banks of $22.3bn.
Given the clear relationship between the strength of a country’s banking sector and the strength of its economy, it is critical for all countries, big and small, to have solid, credible banks.
While many central and eastern European states can attribute part of their recent growth to their largely foreign-owned banks, many other countries, especially in Africa and emerging economies, need much stronger banks if their growth aspirations are to be realised. The Banks of the Future listing clearly demonstrates the size of the challenges ahead.
