HSBC Holdings is the world’s second largest bank by Tier 1 capital, while Royal Bank of Scotland is the seventh largest (with $48.6bn in Tier 1 compared with its rival’s $74.4bn). Both banks have moved into China. Surely, then, a relatively small institution like Bank of East Asia (BEA), a Hong Kong-based, family-controlled bank that ranks 207th in The Banker’s Top 1000 listing of global banks, and has also moved into China, is an irrelevant minnow?
Or compare Citigroup – the largest bank in the world with Tier 1 capital of $79.4bn – with Raiffeisen Zentralbank Osterreich, the 126th largest, whose Raiffeisen International arm has expanded into central and eastern Europe and Russia, and is now present in 16 countries. What can behemoth Citi, which is present in the CEE and Russia, learn from a relatively small Austrian bank?
Small is beautiful
As big banks become bigger on the back of higher profits and consolidation, it is worth bearing in mind that the old adage about small being beautiful can also apply to banks.
Both BEA and Raiffeisen International (RI) are delivering strong profit growth that is based on excellent management and an ability to understand where the opportunities lie in the countries that they have moved into.
BEA saw its first-half profits after tax soar 32% – it has more outlets under its own name on the Chinese mainland than any other foreign bank – while RI saw its pre-tax profit zoom up 54% in the first half of the year.
In The Banker’s Top 1000 listing this summer, we showed that the Top 25 banks by Tier 1 capital now own 41% of aggregate assets, compared to 28% in 1997. Meanwhile, the six largest banks in the world account for 17% of aggregate profits.
It is undisputable that the bigger banks are taking a larger share of the pie. But move out of the Top 25 – in fact, move out of the Top 100 – and one can find outstanding banks.
After all, size isn’t everything.
