The Top 1000 World Banks 2021

The past 18 months have been like none other within living memory. With large parts of the global economy shut down for months at a time, and the fortunes of many individuals and businesses taking a massive hit, the Covid-19 pandemic could have taken a very heavy toll on the global banking sector. 

Yet in general — though pre-tax profits in most regions have dropped substantively and many banks are now carrying balance sheets laden with allowances for expected loan losses — the sector has held up remarkably well, especially compared to the financial crisis of 2007-09. In fact, far from being in dire straits, the sector is better capitalised than ever.

As of the end of 2020 (the review year the 2021 Top 1000 World Banks ranking is based on) aggregate Tier 1 capital held by the world’s 1000 largest banks stood at $9.9tn — the highest total on record and a 12.7% increase compared to the year before. The minimum Tier 1 capital of a bank within the Top 1000 ranking has also hit its highest-ever level, at $547m. It is the first time it has passed the $500m mark, and demonstrates that despite the challenges of Covid-19, the global banking sector is in a strong position to weather the storm.

Top 1000 aggregates

Capital and assets up

Aggregate Tier 1 capital levels have grown at banks across the globe, with only two regions — Latin America and central and eastern Europe (CEE) — suffering levels decline, by 1.2% and 1.5% respectively (though it is worth noting that Latin America has been impacted by currency depreciation and the CEE actually has five fewer banks in the Top 1000 ranking than in 2020). Europe and Asia-Pacific account for the biggest percentage rate increases, at 13.9% and 14.9% respectively. Out of the total increase in global aggregate Tier 1 capital of $1.1tn across all the banks in the Top 1000, China accounted for $465bn of that increase.

Aggregate total assets in the Top 1000 have also increased substantially from $128.1tn in 2020 to $148.6tn in 2021, a 16.0% year-on-year increase. However, the aggregate Tier 1 capital to assets ratio, an important measure of banks’ ability to absorb losses, has decreased slightly year-on-year, from 6.87% to 6.67%. This is effectively the same level as it was in 2018.

However, it is when we turn to profits and profitability that we can start to see the impact of the Covid-19 pandemic, with noticeable drops in the figures compared to last year. Aggregate pre-tax profits fell by 19.2% from $1.25 tn in last year’s data to $936bn, the first time the figure has been lower than $1tn since 2017. Just 16 countries saw their aggregate pre-tax banking profits increase year-on-year.

Aggregate return on assets (ROA), a key measure of profitability, has fallen from 0.72% to 0.51%, its lowest level since 2009. Although it remains substantively higher than this in most regions, only one region has retained an ROA greater than 1% compared to five, including the Middle East and North America, last year; the CEE’s aggregate profitability stands at 1.2%.

Similar trends are also visible for aggregate return on equity (ROE) and return on capital (ROC). This year, just two regions (CEE and Latin America) have an aggregate ROE of greater than 10% compared to five last year, and just three with an aggregate ROC of greater than 10% compared to six last year.

Asia-Pacific, driven by China, now accounts for a whopping 55% of global profits, based on net income data, compared with 43.5% last year. North America is responsible for 24% (26% last year) and western Europe is now responsible for just 10% of global banking profits, down from 16% last year and nearly one third a decade ago.

Regions by total tier 1 capital/assets/pre-tax profits ($m)

Regional aggregate profitability

Chinese boost

There is little evidence of China — the country first hit by Covid-19 — suffering any long-term economic damage as a result of the pandemic. Its banks have actually managed to consolidate their position even further, with ICBC, China Construction Bank, Agricultural Bank of China and Bank of China holding the top four positions for the fourth year in a row.

ICBC has now been at the top of the table for nine consecutive years. Its Tier 1 capital has grown to $439.9bn, the highest individual bank total on record and a $59.7bn increase compared with last year (an uplift almost equivalent to the total Tier 1 capital held by ING, the 36^th largest bank in the Top 1000).

Capital levels at Chinese banks continue to grow significantly, up 18.6% year-on-year, compared to the global average of 12.7%. They now account for 30% of global aggregate Tier 1 capital in the Top 1000 compared with 11% in 2011 and just 5% in 2001. And China accounts for 62% of Asia-Pacific’s Tier 1 capital, compared to 15% for Japan, the next largest contributor to the total.

This continuing growth in capital levels across the banking sector now means China accounts for an even greater share of the top 20 banks: nine compared to seven last year. Industrial Bank has crept up from 21^st position in 2020 to 19^th in this year’s ranking. Postal Savings Bank of China makes the more impressive leap, however, from 22^nd in 2020 to 15^th this year, with its Tier 1 capital increasing by 32.8% compared to last year.  The US is the only country in the Top 1000 ranking to feature more banks than China, although the gap is narrowing. China has 144 banks in this year’s ranking (compared to 143 last year) and the US has 178 (compared to 184 last year).

China’s banks have also performed strongly in pre-tax profits — as part of the select club of just 16 countries to see such an increase — with aggregate pre-tax profits increasing 5.2% year-on-year. Chinese banks account for 37% of global aggregate pre-tax profits, and 69% of aggregate pre-tax profits for Asia-Pacific.

At an individual bank level, pre-tax profits at ICBC hit $60.1bn, the highest total on record. Out of the nine Chinese banks in the top 20, four have seen double-digit increases in pre-tax profits – 10.3% for China Construction Bank; 11.9% for China Merchants Bank; 14.4% for Postal Savings Bank of China; and 10.1% for Industrial Bank.

In the last year, China’s banks also appear to have improved their ability to leverage their assets for profit. In previous years The Banker has reported that while Chinese banks had larger balance sheets and achieve larger profits than their nearest US peers, in relative terms the leading US banks appeared more efficient at generating profit than their Chinese counterparts. This no longer appears to be the case.

In 2020, US banks held 13.6% of total global assets but generated 21.9% of global profits, compared to Chinese banks, which held 24.6% of total assets, but only generated 28.5% of global pre-tax profits. According to this year’s data, China now holds 25.3% of the world’s assets ($148.6tn) and generates 37.2% of profits, while the US holds 13.5% of assets and generates 18.5% of pre-tax profits.

Number of banks in the Top 1000 by region

US banks hold on

For the most part, the major US banks have held fast to their positions from the previous year. JPMorgan Chase remains in fifth position, and is still the highest ranked US bank in the Top 1000 with $234.8bn in Tier 1 capital, a 9.5% year-on-year increase. Bank of America also remains in sixth position. However, Wells Fargo has fallen from seventh place to ninth position in the rankings, enabling Citi, previously in eighth place to jump up one position.

Even before Covid-19, Wells Fargo had been grappling with a number of challenges on its journey back towards better performance. CEO Charlie Scharf, who took over in October 2019, has installed new staff in senior positions, introduced new structures to improve control and oversight at the bank, and prioritised the development of a culture of accountability in the wake of the so-called ‘fake accounts’ scandal of 2016. Given the wider events of 2020, it is difficult to get a sense of what impact these efforts have had so far on the bank’s fortunes.

Importantly, the bank remains subject to the $1.95tn asset cap imposed by the Federal Reserve in February 2018 (albeit with some exemptions granted for pandemic-related business lending), on the basis that its growth would be restricted until it could demonstrate clear improvements in governance. So, it is not surprising that its total assets have remained largely flat. Its Tier 1 capital has also slightly fallen by 0.47% year-on-year.

Goldman Sachs, the only other US bank in the top 20, has fallen from 16^th position in the rankings to 20^th. Despite its Tier 1 capital increasing by 8.5%, it has been overtaken by four Chinese banks. Morgan Stanley, which saw its Tier 1 capital increase by 19.9%, narrowly missed out on a position in the top 20. It has jumped from 26^th position in 2020 to 21^st this year.

Morgan Stanley has punched above its weight in a number of respects this year, earning $14.4bn in pre-tax profits, a 28% year-on-year increase and more than Citi, ranked eighth. Goldman Sachs also saw its pre-tax profits increase, by 16%. As large investment banks, both have benefited from the strong market conditions over the last year, particularly within their global markets and sales and trading divisions, respectively, as well as record levels of activity in debt capital markets, equity capital markets, and a busy period for mergers and acquisitions (M&A). And, unlike other banks, they have not been encumbered by the challenges of managing large retail and business loan books during the pandemic.

Top 20 losses by bank

Ten biggest moves from loss to profit ($m)

Pre-tax profits fall

Universal banks JPMorgan Chase, Bank of America, Citi and Wells Fargo all saw their pre-tax profits fall by 20.5%, 42%, 41% and 98% respectively. US banks have not been alone in seeing their pre-tax profits fall: in total, 601 of the banks in the Top 1000 this year had lower pre-tax profits than last year, and 38 banks made a loss. Of those 38, 18 are in Europe and the six banks with the highest losses are all in Europe.

Spain’s BFA Tenedora de Acciones (Bankia) had the biggest loss of any bank in the Top 1000, of $6.5bn, followed by Germany’s Commerzbank at $3.2bn and Italy’s UniCredit at $3bn. All three banks are currently undertaking actions that will make a substantive impact on their operations. Bankia is currently in the process of merging with CaixaBank, Spain’s third largest bank; the banks have told their customers that the process should be fully complete by the end of 2021, with the new entity operating under the CaixaBank brand. Though the new entity does not have a substantive overseas presence (unlike rivals BBVA and Santander), it will be a major player in the domestic Spanish market.

In February, Commerzbank announced a major restructuring programme, which includes cutting 10,000 staff, more than a fifth of its workforce, as well as the closure of 340 of its 790 branches. The bank is hoping that slashing its costs and improving its digital offering will pave the way for better performance.

As for UniCredit, change at the top is likely to dictate a shift in direction. In April, Jean-Pierre Mustier, CEO since 2016, stepped down and was replaced by Andrea Orcel – former president of UBS’s investment bank and well-known for his ill-fated attempt to become CEO of Santander in 2018. In May, Mr Orcel indicated that he wanted to move the bank into a new phase focused on growth and opened the door to acquisitions of smaller Italian rivals — something that Mr Mustier had previously ruled out.

A top 20 bank, Spain’s Santander (17^th), made the fourth largest loss at $2.6bn – it reported its first-ever loss in its 160-year history in July last year. At a country level, Ireland, Greece, Spain, Portugal and Cyprus all had pre-tax losses at an aggregate level.

European profit challenges

Profitability had been a challenge for Europe’s banks for some years before the pandemic, with tepid economic growth and a low interest rate environment squeezing returns. Key measures of profitability for the region have slumped even further this year. Return on equity, already at a none-too-impressive 5.9% in 2020, now stands at just 2.8%; return on capital has fallen from 6.9% to just 3.1%; and return on assets is now at a paltry 0.16%.

However, one notable standout success story within Europe is Deutsche Bank. In February this year, it reported its first net profit since 2014 and its pre-tax profits also increased by $4.2bn year-on-year from a loss of almost $3bn to pre-tax profits of $1.3bn. It tops the table of the 10 biggest movers from losses to profit. Deutsche had undergone a significant restructuring involving the loss of tens of thousands of jobs and with its investment bank, in particular, the target of efforts to create a “more stable and competitive” operation. In 2020, the investment banking division accounted for more than 38% of the core bank’s revenue and was the only one of its four main divisions to see revenue increase.

HSBC remains the only European headquartered bank within the top 10 banks by Tier 1 capital. It has moved up one position from ninth to eighth position, with its Tier 1 capital increasing by 8.0% year-on-year. Its pre-tax profits fell 34% year-on-year largely as a result of having to set aside considerable sums to cover loan losses.

Among the noise generated by the Covid-19 pandemic, it is hard to pinpoint within the figures what the impact has been of the bank’s restructuring programme, which it commenced in February last year. In the long term, the bank is pegging its hopes on Asia-Pacific and the Middle East to deliver growth in the coming years; the bank already generates most of its income from business done in Asia-Pacific.

France’s two largest banks, Crédit Agricole and BNP Paribas, have maintained their positions within the rankings at 12^th and 13^th, and with growth in their Tier 1 capital of 19.9% and 20.7% respectively. Although both have seen year-on-year falls in pre-tax profits of 14.3% and 5.3%, in the circumstances this is not an especially bad outcome. 

Japan — which in 2019 and 2020 had four banks in the top 20 of the ranking — is now back down to just two. MUFG has held its ground in 10^th position, with a marginal increase in Tier 1 capital. Sumitomo Mitsui has dropped from 14^th position to 16^th, despite increasing its Tier 1 capital by 7.3%, having been outpaced by two Chinese banks. Mizuho, which had been in the top 20 since 2017 is now in 22^nd position; and Norinchukin Bank — which made the impressive leap from 28^th position to 18^th in 2019, then dropped to 19^th in 2020 — has since fallen to 25^th place in the rankings.

The foreign exchange effect

Regional stories

Outside of the largest players represented towards the top of the rankings, it has been a similar story down the rankings in terms of those banks, and economies, under pressure.

Africa, which had been enjoying steady, if slow, growth in the pre-tax profits earned by its banks has seen this fall by 35% year-on-year to $14.7bn, the lowest total since 2012. Eight out of the nine countries represented within the Top 1000 saw aggregate pre-tax profits decrease year-on-year. This includes South Africa, the region’s largest banking economy, where aggregate pre-tax profits fell by 56.1% year-on-year to just $4.4bn – its lowest total since 2004.

The one exception is Egypt, which had a 3.2% increase in aggregate pre-tax profits. Though this is significantly down on the 55.9% increase in pre-tax profits it experienced in 2020, it remains a positive under current circumstances. Egypt has also maintained its strong growth in Tier 1 capital, increasing by 31.5% year-on-year. As a whole, the region has been able to maintain its steady growth, with aggregate Tier 1 capital increasing by 7.4%.

In Latin America (including the Caribbean) the situation is more universally challenging. For all but two out of the 15 countries (Guatemala and Uruguay), aggregate pre-tax profits have fallen, and for several aggregate Tier 1 capital has fallen too. This includes Brazil, the region’s largest economy, where aggregate pre-tax profits fell 60% year-on-year and Tier 1 capital fell 8.2% (though, as already mentioned, the region has been negatively impacted by currency depreciation).

Middle Eastern banks have also had a difficult year, with aggregate pre-tax profits falling by 28.5%. For the region’s largest banking economy, Saudi Arabia, they have fallen by 21.1%, and by 41.4% for its second-largest, United Arab Emirates. Saudi British Bank, the region’s 12^th largest bank made the 10^th largest pre-tax loss, globally, of $1.1bn. However, having fully completed its merger with Alawwal Bank (another Saudi Arabian bank) in March this year, the bank will be hoping for better fortunes.

Top 10 countries by allowance for loan losses increase

Top 10 countries by total impairment charges

Top 10 countries by total impairment charges as a percentage of total operating income

Loan books under pressure

Undoubtedly the Covid-19 pandemic has had a major impact on banks’ profitability this year, with only a minority of institutions appearing to be immune to its impact. One of the most obvious impacts is visible in the allowances for loan losses that many banks have had to set aside in anticipation of souring loans caused by the widespread and persistent economic disruption witnessed across the globe.

At an aggregate global level, an additional $352bn has been set aside in allowances for loan losses (held as contra assets on banks’ balance sheets), an increase of 26% compared to 2020. However, the picture varies considerably by region. In North America, for example, the amount set aside in allowances for loan losses has more than doubled since 2020, whereas in Asia-Pacific it is up by a more modest 25%; 22% in Africa, as well as in the Middle East; and just 17% in Europe. The three countries with the largest year-on-year increases in allowances for loan losses are the US (106.1%), the Philippines (98.5%) and Indonesia (89.9%).

A possible explanation for the higher figures for the US relates to accounting rules. Since the start of 2020, US banks have had to adhere to the US Financial Accounting Standards Board-mandated current expected credit losses (CECL) accounting standard. This is a significant development, as it means that US banks must effectively front-load their response to expected losses that may occur at any time during the life of the loan. 

The majority of other jurisdictions operate under International Financial Reporting Standards (IFRS) 9 rules, which includes a tiered approach on when and how to account for expected credit losses depending on what stage of credit risk or credit impairment a financial asset is judged to be at. In effect, this means the figures for US banks may be somewhat amplified when compared to international peers, and vice versa.

Impairment charges (costs that recognise the diminishing value of assets, included on the income statement that is, resulting in a reduction in profits) have also increased considerably. Although impairment charges can relate to assets other than souring loans, they are likely to have been a significant driver in the increases in this period. China, followed by the US, have the two highest levels of aggregate impairment charges in the world. However, given that they are the two countries with largest banking balance sheets this is perhaps unsurprising. What is perhaps more significant is that total impairment charges at US banks have increased by 157% year-on-year, compared to just 22% for China.

The US has seen far from the most extreme increases in impairment charges, however. At an aggregate level, Belgian banks saw year-on-year impairment charges increase by 1603%, followed by Norway at 392% and Denmark at 334% (we excluded countries with fewer than five banks in the ranking in this analysis). To fully understand the impact of these charges, though, they should be viewed in the context of their impact against operating income. And while these countries may have seen the highest aggregate increases, they are not the hardest hit. Portugal, where aggregate banking impairment changes account for 49.9% of operating income, is arguably the country most under strain from this issue. It is followed by Kuwait, with a ratio of 39.5%, and Colombia at 39.2%.

Biggest pre-tax losses by country, 2009 vs 2021

Real effect delayed

Given the continuing high levels of economic support being provided by governments and central banks across the world, it may be some time before the real effects of the pandemic are felt in relation to loan losses in many jurisdictions.

However, despite the challenging circumstances facing banks over the past 18 months, the banking sector does appear to be far more resilient a decade or so on from the global financial crisis — and not only in terms of healthy levels of capitalisation ensuring that there has been no existential threat posed by the difficulties of the pandemic. On profits, while the Top 1000’s combined pre-tax profits dropped by 18.8% year-on-year, the fall is nowhere near as dramatic as during the global financial crisis, when profits plummeted by 85.3% in 2009.

For context, the three countries whose banks were hardest hit — the US, the UK and Germany — saw pre-tax losses in 2009 of $91bn, $51bn and $35bn, respectively. In 2020, banks in all three countries continued to make profits of $173bn, $18bn and $3bn, albeit these were much smaller than in 2019. Bolstered by government support programmes, banks have also expanded their lending, with aggregate gross total loans increasing by 11.4%, though this was not enough to offset the larger growth in allowances for loan losses.

However, the pandemic has been a period of extremes. While many businesses and individuals have suffered terrible financial outcomes as a result of the disruption, in other parts of the global population that have been able to continue working, the enforced home working and lockdowns that limited their spending opportunities have resulted in a big boost to savings. Aggregate gross total deposits have shot up by $13.7bn across all banks in the Top 1000, a 17% year-on-year increase.

In North America and Europe, the increases have been higher than this global average, at 22% and 18%. In the short term, particularly while interest rates remain so low, this influx of capital will be a source of cheap funding for many banks.

Mergers and acquisitions in the Top 1000

Subdued M&A

Last year appears to have been a relatively quiet one for banking merger and acquisition (M&A) activity within the Top 1000, and 2021 looks set to be busier. The largest deal involved Unione di Banche Italiane (UBI Banca), previously Italy’s fifth largest bank, which was purchased by Intesa Sanpaolo in April 2020. However, due to competition concerns, Intesa agreed to sell about 500 branches from the enlarged group to BPER Banca, which explains why BPER is listed as the acquirer in our table.

The US saw the most activity, with four different banking M&A transactions completing during 2020. The largest being the “merger of equals” between IberiaBank (so called as it was founded in New Iberia, Louisiana) and First Horizon, headquartered in Tennessee. The new entity is branded under the First Horizon name and operates across 11 states in the south-eastern US.

The foreign exchange effect

For comparability and consistency, we convert all the data used in the Top 1000 into US dollar values. However, year-on-year depreciation in the value of some currencies can have the effect of suppressing the position of some banks within the ranking. For transparency, the table “The Foreign Exchange Effect” lists the 50 banks within the Top 1000 that would move up rankings the most if the effects of the depreciation were recalibrated. Typically, smaller banks are affected the most — this year, the largest bank affected is Russia’s Otkritie Financial Corporation Bank, which could have been in 223rd position in the rankings, rather than 256th without the effects of currency depreciation.

Loans and deposits year-on-year & change