The full extent of the carnage in the global banking system is evident in The Banker’s 2009 Top 1000 rankings.
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The UK's Royal Bank of Scotland suffered the worst losses in the world at $59.3 billion, ahead of two American banks, Citigroup and Wells Fargo.
Overall, the banks in the Top 1000 had an abysmal year. System profits fell 85.3% from $780.8 billion to $115 billion and return on equity dropped from 20% to 2.69%. Banks that stuck to the basics of banking, taking deposits and lending in their home markets, fare the best. Industrial and Commercial Bank of China followed by China Construction Bank and Spain’s Santander achieved the largest profits.
“These banks stuck to the basics of banking and did not get involved in some of the more complicated and highly leveraged financial instruments that caused so much damage at banks like Citigroup, Royal Bank of Scotland and UBS,” said The Banker’s editor Brian Caplen. “In the case of Spain they were helped to do so by the strictures of a tough national regulator.”
“In future banks will be run much more conservatively. Regulators will require them to hold more capital and be less leveraged. This will reduce the profits of the industry as a whole but will bring about a safer banking system.”
Now in its 39th year, The Banker’s Top 1000 is the industry benchmark listing banks by their capital strength. With banks having recapitalised over the past year, often with government support, the Top 1000 list shows that the international banking structure – dominated by Western banks with a handful of Japanese and Chinese players – remains relatively stable. JP Morgan, up from fourth last year, followed by Bank of America, Citigroup, Royal Bank of Scotland and HSBC which is the only one of the top five not to have received any government support.
If government support is removed from the ranking HSBC would be in third place, Royal Bank of Scotland falls to seventh while Japan’s Mitsubishi UFJ moves from 7 to 4 and Industrial and Commercial Bank of China goes from 8 to 5.
Consolidation in the banking sector brought about by the crisis has also impacted the rankings. JP Morgan’s takeover of Bear Stearns and Washington Mutual allowed it to climb into top position, Bank of America’s acquisition of Merrill Lynch pushed it to second and Wells Fargo’s acquisition of Wachovia allowed it to jump from 23 to sixth place. Lloyds and HBOS officially combined too late for the ranking but would have come in 16th just behind Barclays on consolidated numbers.
2009 has also seen the stand-alone investment bank become extinct. Investment banks are not included in the Top 1000 but during the crisis leading Wall Street banks converted to bank holding companies as a form of protection. As a result Goldman Sachs enters the ranking at number 13 and Morgan Stanley at number 17.
For full online access to all the data making up the Top 1000, and for the complete Banker Database of 5000 banks, you have to be a subscriber to The Banker Database.
