The UK's entrants performed well in The Banker's 2018 ​Top 1000 World Banks ranking but mostly due to overseas rather than domestic earnings. So, asks Brian Caplen, does this add anything to the Brexit debate?

UK banks increased their profits by $20bn, or 118%, in The Banker’s 2018 Top 1000 ranking, the third highest rise after China and Italy. But this is partly attributable to better performances from domestic players such as Lloyds and Royal Bank of Scotland – the latter finally returning to profit after nearly a decade of losses – a more significant role was played by overseas earnings.

British banking, like global banking, is a highly unequal affair. HSBC accounts for about one-third of UK bank capital in The Banker’s Top 1000 World Banks ranking. Add in Barclays, RBS, Lloyds and Standard Chartered and you have 90% of the sector.

This means that when HSBC does well, UK banking does well, even though most of the bank’s growth and profits are coming from outside the UK. This was the case in 2017 when HSBC increased its profits by 141%, putting the years of painful restructuring and fines behind it. New CEO John Flint says the aim now is to get back into growth mode. But nearly 90% of those HSBC profits came from Asia wh​ile​ European operations are still losing money.

Another bank to have a good year was Standard Chartered, with a near five-fold rebound in profits. But as with HSBC, Standard Chartered’s returns are not coming from Europe. The bulk of the bank’s earnings come from Asia, Africa and the Middle East.

Before the financial crisis, the UK punched above its weight in international finance and, evidently, its two most international banks have stayed that way. By contrast RBS and Lloyds are now focused solely on the UK and Barclays has pulled back from Africa.

This hardly makes the case for a new global Britain that has been cited by Brexiteers as a reason for leaving the EU. Being part of the EU clearly did not hold back UK banks from going global, as they were already doing it. The bigger factor​s​ in determining UK banking’s international fortunes ha​ve​ been the financial crisis and the regulation that followed.  

This has forced banks to restructure and – as has even been the case with an international bank such as HSBC – focus their business on particular regions rather than try to cover the entire globe. It is difficult to imagine any kind of new trade deal, post Brexit, that would push things in a more global direction.

Click here for more on the 2018 ​Top 1000 World Banks ranking. 

Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen

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