28 June 2021: The world’s largest banks have withstood the pressures from the Covid-19 pandemic, adding 12.7% to their collective Tier 1 capital to reach the highest ever level of $9.9 trillion, according to The Banker’s latest ranking of the Top 1000 World Banks. In addition, total assets increased by 16.0%, to $148.6 trillion, while the deposit base expanded by 17.1%, to $93.9 trillion.
Compared to the global financial crisis in 2007-09 there is more resilience in the banking sector. Overall, the Top 1000 World Banks increased the allowance for loan losses (or the reserve to cover bad debts) by 25.8%, to $1.7 trillion, which is a bigger increase than the aggregate loan book, which grew by 11.4%. However, as many jurisdictions have extended their Covid-19 support packages into 2021, the true impact of the pandemic has not hit the banks’ loan books yet.
Despite challenging economic conditions, banks have been able to generate pre-tax profits (see table: Top 10 Countries’ profit change). However, most countries recorded a reduction in pre-tax profits, with just 16 countries increasing aggregate profits. While the Top 1000’s combined profits dropped by 19.2% year-on-year, it is not as catastrophic when compared to the fallout from the financial crisis, when profits plummeted 85.3% in 2009.
China continues to be the engine of growth for the world’s banking industry, increasing aggregate Tier 1 capital and total assets by 18.6% and 18.4%, respectively. China, with 144 banks in the ranking, now holds almost double the amount of Tier 1 capital ($2.96 trillion) than the US ($1.58 trillion), with 178 banks in the ranking.
The four largest Chinese banks – Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China and Bank of China – have consolidated their positions at the top of the ranking, and have extended their lead over US counterparts (JPMorgan Chase, Bank of America, Citigroup and Wells Fargo) with double-digit growth in Tier 1 capital (see table: Top 20 World Banks 2021). Overall Chinese banks increased their aggregate Tier 1 capital by 18.6%, against 8.5% for US banks.
In addition, profits continued to grow in China by 5.2% year-on-year, while falling by 31.5% in the US and 41.8% in western Europe.
Joy Macknight, editor of The Banker, said: “During a challenging year for the world’s banking industry, the top Chinese banks have extended their lead over US counterparts with double-digit increases in Tier 1 capital, as well as expanding their asset base and increasing profits. The global banking industry overall has exhibited impressive resilience in such a difficult time.”
However, western Europe had another difficult year – due to low economic growth and the interest rate environment hitting the profitability of the region’s biggest lenders. Of the largest European economies, banks’ aggregate pre-tax profits shrank by 43.71% in Germany, 75.72% in Italy and 47.67% in Netherlands, while France experienced a more modest decline of 11.61%. Spain recorded negative pre-tax profits at an aggregate level, with two of its largest banks, Banco Santander and Bankia, moving from profit to loss in this period (see table: Ten largest moves from profit to loss).
The Asia-Pacific region generated more than half (55.1%) of the world’s profits, based on net income data, up from 43.5% in the 2020 ranking, and was the only region to increase its share of profits.
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Notes
Tier 1 capital is the core measure of a bank’s financial strength under the Basel regulatory framework.
Contact
For more information, please contact:
Henry Conner I henry.conner@edelmansmithfield.com / 07709 577073
Mark Staniland I mark.staniland@ft.com
About The Banker
The Banker is the world’s premier banking and finance resource, providing global financial intelligence since 1926.
The Banker is the key source of data and analysis for the industry. The Banker’s Top 1000 World Banks ranking has been setting the industry benchmark since 1970, providing comprehensive intelligence about the health and wealth of the banking sector. To find out more visit www.thebanker.com/top1000. The Banker is a service from the Financial Times.
Joy Macknight is the editor of The Banker. She joined the publication in 2015 as transaction banking and technology editor and became editor in March 2021. She has been a financial and technology journalist for more than 15 years.
About the Financial Times
The Financial Times is one of the world’s leading business news organisations, recognised internationally for its authority, integrity and accuracy. The FT has a record paying readership of more than one million, three-quarters of which are digital subscriptions. It is part of Nikkei Inc., which provides a broad range of information, news and services for the global business community.
