The 2022 ranking has hit major milestones for aggregate Tier 1 capital, total assets and pre-tax profits.

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The Banker’s Top 1000 World Banks ranking has reached new heights in 2022, breaking records in several important metrics. It surpassed the $10tn mark in Tier 1 capital, $150tn in total assets and $1.44tn in pre-tax profits (PTP). The minimum Tier 1 capital needed to enter the 2022 ranking also reached an all-time high of $556m.

It is clear that the banking sector is better capitalised than ever before, which should make it resilient in the face of future economic shocks.

However, the profitability of the world’s banking system, as measured in return on assets (ROA), has still not recovered to the same levels as just before the global financial crisis (GFC) of 2008/09. In 2007, the global ROA was 1.06%; this year, it stands at 0.75%. It has never made it above 1.00% in the interim years.

This year, western Europe has the lowest ROA of the regions (0.44%), followed by Asia-Pacific (0.69%). The latter’s percentage is brought down by its two largest banking sectors: China’s ROA is 0.81% and Japan’s is 0.23%. However, even without them, Asia-Pacific only reaches 0.79%. For comparison, China’s ROA was 0.91% and Japan’s was 0.70% in 2007.

Central and eastern Europe (CEE) has the highest ROA of the regions (1.94%), followed by Latin America (1.35%) and the Middle East (1.27%). In 2007, CEE had an ROA of 2.87% and has maintained a more than 1% ratio since 2017.

North America, comprised of the US and Canada, dipped below 1% in 2021 (0.7%) but has climbed back up to 1.18%. The US banking sector has an ROA of 1.27%, while Canada’s is just 0.84%.

Where profits are generated has also changed since before the onset of the GFC. In 2007, western Europe generated 46.2% of global PTP, North America created 26.5% and Asia-Pacific was 18.9%. This year Asia-Pacific generated 43.0%, North America 28.5% and western Europe now makes up just 17.3% of global PTP.

This year’s 54% surge in global PTP marks a significant rebound from 2021’s ranking, when PTP contracted by 19%. However, much of this boost can be attributed to a reduction or reversal in last year’s credit impairment charges for expected loan losses that didn’t materialise.

At a regional level, South America saw the biggest annual increase in PTP at 129%, followed by Europe at 103% and North America at 90%. Spain was the country with the biggest annual increase in PTP, at 621%.

The biggest turnaround story this year is Banco Santander, which last year recorded its first loss in its 160-year history, of $2.56bn, this year recorded PTP of $16.5bn. In 2020, the bank made a non-cash adjustment to the valuation of goodwill and deferred tax assets on its balance sheet, which had a significant negative impact on its results.

To access the full results, please go to Top 1000 World Banks.

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

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