The Banker’s Top 1000 World Banks ranking for 2021, published today, shows a resilient industry that is better capitalised than before the global pandemic struck.

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While bank profits have certainly taken a knock during the past year, the global banking industry’s profitability has weathered the Covid-19 pandemic storm much better than it did during the global financial crisis in 2007-09, according to The Banker’s 2021 Top 1000 World Banks ranking, based on data from The Banker Database.

 In 2009, for instance, pre-tax profits plummeted by more than 85%, with the US banking sector taking the biggest hit, with 181% of profits wiped out year-on-year, and the UK not far behind with 160% erased.

 Biggest pre-tax losses by country, 2009 vs 2021

Country World Region Pre-tax profits 2009 (US$ m) YoY % change (2008 vs. 2009) Pre-tax profits 2021 (US$ m) YoY % change (2021 vs. 2020)
US North America -91,084 -180.59 172,783 -31.51
UK Europe -51,236 -160.17 17,825 -53.08
Germany Europe -34,925 -229.71 3,288 -43.71
Switzerland Europe -27,031 -248.29 20,327 15.2
Belgium Europe -26,587 -299.17 2,986 -23.94

At the end 2020, the period under review, the Top 1000’s combined pre-tax profits contracted by 18.8% year-on-year, with both the UK and Germany seeing larger profit falls than the US.

The good news is that, overall, the banking industry has done relatively well. Collectively, the Top 1000 banks have built up the highest ever level of Tier 1 capital, reaching $9.9tn. In addition, total assets increased by 16%, to $148.6tn, while the deposit base expanded by 17%, to $93.9tn.

China continues to be the growth engine of the world’s banking industry, increasing both aggregate Tier 1 capital and total assets by just over 18%. The country, with 144 banks in the ranking, now holds almost double the amount of Tier 1 capital ($2.96tn) as the US ($1.58tn), with 178 banks in the ranking. China was also one of just 16 countries that bucked the general trend and increased its aggregate pre-tax profits this year, by 5.2%.

ICBC remains the world’s largest bank for the ninth year in a row, followed by compatriots China Construction Bank, Agricultural Bank of China and Bank of China who have topped the ranking for the past four years. These four have extended their lead over their US counterparts (JPMorgan Chase, Bank of America, Citigroup and Wells Fargo) with double-digit growth in Tier 1 capital.

However, it is not all good news. Europe’s banks continue to struggle, with tepid economic growth and a low interest rate environment squeezing returns. HSBC remains the only European headquartered bank in the top 10 by Tier 1 capital for the 10th year running. Key measures of profitability for the region have slumped even further this year. Return on equity now stands at just 2.8%; return on capital has fallen from to just 3.1%; and return on assets is now at a paltry 0.16%, the lowest level among all the regions.

In addition, as governments and central banks around the world begin unwinding their pandemic support packages, there is growing concern that non-performing loans (NPLs) will spike. Many banks have already set aside allowances in anticipation of souring loans, to the tune of a $352bn collectively, a 26% year-on-year increase. But it may be some time before the real effects of the pandemic are felt in relation to NPLs in many jurisdictions.

The Banker Database tracks more than 120 data points. The 2021 Top 1000 World Banks ranking covers institutions from 102 countries.

Joy Macknight is editor of The Banker. Follow her on Twitter @joymacknight

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