As economies across the world grapple with the fallout from Covid-19, the resilience of the global financial system is once again being put to the test. Marie Kemplay crunches the numbers to assess the health of the world’s banks going into the pandemic.

If there is one positive to be found as banks, and economies across the board, enter a period of unprecedented turbulence, it is that years of post-global financial crisis reform have delivered a banking system that is safer, better capitalised and should be more resilient in the face of economic disruption. In the current circumstances, the regulatory requirements introduced in the wake of the 2007-08 crisis – which at times seemed onerous – may prove their worth.

Top 1000 aggregates


  2020 ($bn) 2019 ($bn) change from preious year (%, bps)
Aggregate Tier 1 8,796 8,292 6.08
Aggregate Total Assets 128,113 122,801 4.33
Aggregate Pre-Tax Profits 1,159 1,135 2.13
Profits/Tier 1 (%) 10.52 10.87 -35.44
Return on Assets (%) 0.72 0.73 -0.80

The aggregate level of Tier 1 capital held by the world’s 1000 largest banks stood at $8796bn at the end of 2019 (the review year that the Top 1000 World Banks ranking is based on), the highest it has ever been. This marks a 6.08% year-on-year increase from the 2019 rankings, and an 79.64% increase from the aggregate total in 2010. The aggregate Tier 1 capital-to-assets ratio for the Top 1000 also reached its highest ever level at 6.87% – this ratio has steadily increased over the past 10 years from 5.14% in 2010.

Although the minimum level of Tier 1 capital held by a bank in the Top 1000 ranking has taken a slight dip, standing at $476m, compared to $492m in last year’s rankings, it is still at its second highest-ever level. Had it not been for the fact that 24 Indian banks and 10 Lebanese banks were unable to provide data for our analysis this year and therefore couldn’t be included in the rankings, we would have likely seen this figure increase.

Top 1000 Tier 1 capital

Overall, the data at a global level points a banking system that ended 2019 in generally good health. At an aggregate level, total assets for banks in the Top 1000 stood at $128,113bn, a 4.33% increase from 2019. Aggregate pre-tax profits also increased year-on-year to $1,159bn, a 2.13% year-on-year increase.

Looking beyond capital levels and profits, there are many other factors that determine how well banks perform overall. From page 120 to 153 of this year’s Top 1000 report, The Banker examines in detail how well banks in 20 of the world’s leading economies performed in the past year, and in what shape they were in entering the coronavirus period, using additional data from The Banker Database. This is the first time we have included our best-performing banks analysis in our Top 1000 reporting, which examines performance based on 18 different indicators across eight key categories: growth, profitability, operational efficiency, asset quality, return on risk, liquidity, soundness and leverage.

Regions by total Tier 1 capital/assets/pre-tax profits ($bn) 

  Tier 1 Capital Assets Pre-tax profits
China 2,482 31,573 330
US 1,464 17,363 253
Eurozone 1,399 26,071 129
Japan 691 14,023 41
UK 404 7,868 38

Chinese capital vs US efficiency

China has once again consolidated its leading position at the head of the Top 1000 table. ICBC, China Construction Bank, Agricultural Bank of China, and Bank of China hold the top four positions for the third year running, with ICBC in first position for the eighth consecutive year. All four saw substantive increases in Tier 1 capital of between 10% and 14%, as well as modest pre-tax profit increases of between 3% and 7%.

Out of the top 20 banks in the rankings, seven are Chinese, one more than last year, with Shanghai Pudong Development Bank moving up the Tier 1 capital ranks from 24th place to 20th. China has 143 banks in 2020’s Top 1000 World Banks ranking (seven more than 2019), a total beaten only by the US with 184 banks in the ranking (15 more).

Top 1000 Global share of profits

Although we may now be passed the stage where pre-tax profit growth across China’s banks is in the double digits (last seen in 2014), they have bounced back from last year’s 3.04% dip, to grow by 5.72%.

As the country where Covid-19 originated, China was the first to bear its economic brunt – but it is also one of the first to see its economy return to more normal functioning. However, it is not yet out of danger. Domestically, localised outbreaks remain likely (at the time of writing, some cases had been identified in Beijing); and internationally, the virus is rampant, hitting both demand and supply chains for Chinese goods.

China’s banks are likely to take a hit in the next year, particularly as they are highly exposed to the fortunes of the country’s businesses, with 55.67% of outstanding gross loans going to corporate borrowers. China has $17,905.6bn worth of gross loans outstanding, spread across 143 banks. This is considerably higher than for any other country; the nearest comparison is the US with $8052.9bn of gross loans outstanding, spread across 184 banks, and 47.51% of that total lent to corporate borrowers.

Regional aggregate profitability

region ROA (%) ROE (%) ROC (%)
Africa 1.57 16.09 19.49
China 0.87 10.73 11.02
Japan 0.22 4.37 4.53
Asia Pacific (ex China and Japan) 0.79 9.06 10.54
Central and Eastern Europe 1.79 14.30 15.04
Europe 0.38 5.91 6.90
Middle East 1.43 11.28 12.41
North America 1.11 11.29 14.40
Latin America (total) 1.60 17.08 20.84

The US’s biggest banks have also held their positions in the rankings. For the third consecutive year, JPMorgan Chase, Bank of America, Wells Fargo and Citigroup make up the fifth, sixth, seventh and eighth placed banks in the Top 1000, in what was a relatively unremarkable period for the US banks. Aggregate pre-tax profits remained largely static, with a 0.65% fall – despite an additional 15 US banks being included in the rankings this year.

Overall, however, US banks continue to be considerably more cost and capital efficient than their Chinese peers. Chinese banks hold 24.64% of total global assets and account for 28.46% of global pre-tax profits, compared to just 13.55% of assets for US institutions, yet 21.86% of profits. At an aggregate level, return on assets (ROA), a measure that shows profits earned against a bank’s resources, stands at 1.11% for North American banks (which includes Canada) and at 0.87% for Chinese banks.

China vs US loan book breakdown

Country Gross total loans ($m) Financial institutions Corporate Government Retail
China 17,905,600 6.01 55.67 0.57 37.75
US 8,052,941 7.11 47.51 0.18 45.2

One clear example of a US bank outperforming its Chinese peers is JPMorgan Chase. It achieved pre-tax profits of $44.5bn, a 9.19% increase on the previous year and greater than the profits achieved by Bank of China and Agricultural Bank of China, both ahead of it in the Tier 1 capital rankings. It is relatively easy to pinpoint why: JPMorgan has a very respectable return on equity (ROE) of 13.93% (up from last year’s 12.66%) and an ROA of 1.36%, the highest of any bank in the top 20.

Its performance was not matched by its US peers, however. Bank of America’s pre-tax profits fell by 5.29%, and although Citigroup saw an increase, it was a small 1.85%. Wells Fargo, still recovering its reputation and bearing financial costs from the 2016 “fake accounts” scandal, saw its pre-tax profits decrease by 15.2%. The bank appointed a new CEO, Charlie Scharf, in October 2019, hoping to move the institution forward into a new, more profitable, chapter.

Ten biggest moves from loss to profit ($m)

Bank Name  Pre-Tax Profits Previous Pre-Tax Profits Recovery
Nomura Holdings 2,284 -340 2,624
Banco BPM 951 -314 1,264
Suruga Bank 293 -677 970
Piraeus Bank Group 442 -309 751
Alpha Bank 163 -333 496
Credit Europe Bank 16 -349 365
Gulf International Bank 66 -220 286
Credito Valtellinese 34 -114 148
Banca Monte dei Paschi di Siena 40 -88 128
Cassa di Risparmio di Asti 68 -17 85

Western European woes

It was another difficult year for western Europe’s banks, which have struggled to perform in an environment of relatively weak economic growth and negative interest rates. Although they still held the third largest share of global profits, after Asia-Pacific and North America, western European banks’ portion has fallen from to 16.37%, from 18.59% last year.

It was a particularly difficult year for Europe’s largest bank, HSBC; its pre-tax profits dropped by a third year-on-year. It cited a $7.3bn “goodwill impairment” as the cause of the loss. This impairment reflected “lower long-term economic growth rate assumptions” in its global banking and markets and its European commercial banking businesses, as well as costs associated with the “planned reshaping” of its global banking and markets business.

In a bid to arrest the decline, in February 2020, the bank announced a major restructuring programme that will reduce its European and US operations, and refocus resources towards the Middle East and Asia, reportedly with the loss of 35,000 jobs. In March, it announced a pause in redundancies due to the coronavirus outbreak but the plans are said to be back under way.

Latin America pre-tax profits share evolution (%)

  2010 2019 2020
Brazil 82.75 57.19 54.88
Chile 3.78 6.72 7.03
Colombia 3.15 7.97 8.54
Mexico 3.06 9.03 10.45

HSBC, which has been headquartered in the UK since 1993 but makes most of its profits in Asia, faces a challenging year ahead on several fronts. At the end of March, it announced it would cancel its 2019 dividend payments (in line with other UK-based banks), following pressure from the UK’s Prudential Regulation Authority to suspend the payments during the pandemic and its ensuing economic disruption. The move is said to have angered many Hong Kong-based investors, who own a large proportion of HSBC shares.

The bank has also faced criticism from UK and US politicians following a post on Chinese social media platform, WeChat, that apparently endorsed China’s new security law for Hong Kong, which Beijing wants to introduce in the wake of protests in the special administrative region during 2019. As the bank seeks to pivot more towards Asia, it is likely to face a difficult geopolitical balancing act.

Middle East pre-tax profits share evolution (%)

Country 2000 2005 2010 2015 2020
Israel 22.56 13.37 9.09 7.29 9.89
Qatar 2.33 3.7 12.53 15.09 15.05
Saudi Arabia 27.55 33.43 26.7 24.3 28.9
United Arab Emirates 10.86 12.69 20.45 26.08 27.25

At an aggregate level, pre-tax profits across UK banks fell 12.73% year-on-year. Lloyds Banking Group and Nationwide Building Society were two other large banks to see big year-on-year dips in profits of 23.38% and 20.35%, respectively. Barclays, the UK’s second largest bank, fared better with a 29.62% increase in pre-tax profits, although its position in the Tier 1 capital rankings fell to 28th position, from 25th the previous year. With UK banks facing the double challenge of the coronavirus pandemic and likely disruption following the end of the Brexit transition period on December 31, as the UK withdraws from the EU in substance as well as name, the year ahead is likely to be tricky.

French banks took the largest share of European banking profits for the fifth consecutive year, although their pre-tax profits slumped slightly, by 1.96%. France’s second, third and fourth largest banks – BNP Paribas, Groupe BPCE and Crédit Mutuel – returned modest increases in pre-tax profits of 9.11%, 2.2% and 2% respectively. However, the country's largest bank, Crédit Agricole, saw a year-on-year drop in pre-tax profits of 8.65% and at Société Générale pre-tax profits were down 16.74% year-on-year – although performance, particularly in its investment banking division, had picked up in the final quarter of the year.

Top 15 countries with lowest aggregate return on assets

Country Region RoA
Germany Western Europe 0.01
Greece Western Europe 0.10
Cyprus Western Europe 0.12
Portugal Western Europe 0.13
Japan Asia-Pacific 0.22
Luxembourg Western Europe 0.29
France Western Europe 0.31
Finland Western Europe 0.32
Ireland Western Europe 0.34
UK Western Europe 0.35
Belgium Western Europe 0.37
Estonia Central and Eastern Europe 0.39
Italy Western Europe 0.43
Denmark Western Europe 0.44
Netherlands Western Europe 0.45

ROA across western Europe was already at a pretty dire 0.43% last year, and it has now fallen to 0.38%. Similarly, ROE has also fallen from 6.71% last year to 5.91% this year. Of the 15 countries with the lowest ROAs, globally, 13 of them are in western Europe.

The situation is particularly extreme in Germany, where average ROA now stands at a negligible 0.01%, down from 0.09% last year. Germany’s embattled Deutsche Bank experienced another tough year, coming in second in the biggest loss table. Only India’s troubled Yes Bank has a bigger loss than Deutsche’s loss of $2.96bn. Germany’s largest bank is currently undergoing a large scale restructuring programme, including cutting its global headcount by 18,000, and has cited costs associated with this as the reason for making a loss in 2019. The bank paused redundancies in March as the coronavirus pandemic took hold in Europe, but the process is reportedly back under way. Its position in the Tier 1 capital rankings has also dropped a further five places, from 27th place to 32nd.

Number of banks in the Top 1000 by region

World Region 2019 2020 Change
Africa 33 36 3
Asia-Pacific 387 372 -15
Caribbean 7 7 0
Central America 16 18 2
Central and Eastern Europe 39 44 5
Central Asia 2 4 2
Middle East 81 68 -13
North America 183 198 15
South America 33 33 0
Western Europe 219 220 1

Shrinking NPLs

On a more positive note, Greece, Italy and Portugal appeared to be reaping the rewards of their efforts to tackle their non-performing loans (NPLs). For the first time in five years, Greek banks achieved growth in pre-tax profits and Italy has the largest increase in pre-tax profits out of western Europe’s countries, while Portugal's pre-tax profits increased by 10.58%.

Allowances for loan losses decreased significantly in all three, by 35.96%, 22.81% and 22.80% in Portugal, Italy and Greece respectively, with impairment charges and provisions reducing by 4.58%, 16.95% and 20.43% respectively.

Although they have made clear improvements, an Italian bank and two Greek banks still make up the three banks with the largest NPL ratios, all above 30%. Trade Bank of Iraq, a state-owned financial institution established in 2003 to support increased import and export activity comes in fourth position with an NPL ratio of 29.93%. Brazil’s Banco BMG, with the fifth highest NPL ratio in the rankings, has struggled with a high NPL ratio for several years, although its current NPL ratio of 28.80%, is an improvement on where it stood in 2018 at 32.90%.

Tax paid as percentage of operating income by bank

TOP 1000 Rank Bank Region Country Taxes (USD m) Tax paid as % of Net operating income
76 HDFC Bank Asia-Pacific India 1,446 15.3
52 ANZ Banking Group Asia-Pacific Australia 1,806 14.97
53 Westpac Banking Corporation Asia-Pacific Australia 1,999 14.9
49 Commonwealth Bank Asia-Pacific Australia 2,339 14.66
96 Industrial Bank of Korea Asia-Pacific South Korea 541 13.46
1 ICBC Asia-Pacific China 11,220 13.08
65 Shinhan Financial Group Asia-Pacific South Korea 1,096 12.63
66 DZ Bank Europe Germany 943 12.36
15 Banco Santander Europe Spain 4,974 12.36
55 National Australia Bank Asia-Pacific Australia 1,410 12.28
27 Sberbank Central and Eastern Europe Russia 3,620 12.03
32 Deutsche Bank Europe Germany 2,955 11.72
17 China Merchants Bank Asia-Pacific China 3,392 11.36
61 KB Financial Group Asia-Pacific South Korea 1,054 11.3
33 BBVA Europe Spain 2,307 11.23
2 China Construction Bank Asia-Pacific China 8,208 11.16
81 Hana Financial Group Asia-Pacific South Korea 849 11.13
19 Norinchukin Bank Asia-Pacific Japan 281 11.04
34 ING Europe Netherlands 2,122 11
69 Sumitomo Mitsui Trust Bank Asia-Pacific Japan 696 10.94

African improvements

It has been a steady year for Africa’s banks at an aggregate level. Three additional African banks are in the Top 1000 this year, with Tunisia’s Banque Nationale Agricole returning to the rankings, after dipping out in 2019 and Egypt’s Faisal Islamic Bank appearing for the first time since 1999. Morocco’s Credit Immobilier et Hotelier has made its Top 1000 debut. This takes the number of African banks in the Top 1000 up to 36, the highest number since 2015, which had an all-time high of 37.

The value of Tier 1 capital and assets at African banks have continued their long-term steady upward trajectory, continuing the recovery from a dip in 2016 and 2017. The value of Tier 1 capital at African banks now stands at $86.16bn, a 14.32% rise year on year and a 26.49% increase since 2015. For assets, this figure now stands at $1068bn, a 10.67% year-on-year increase and a 22.59% increase since 2015. Aggregate pre-tax profits have also continued their pattern of gradual growth since 2017, reaching $23bn, a 12.62% year-on-year increase.

European aggregate profitability

ROA 2020 ROA 2019 ROA % change ROE 2020 ROE 2019 ROE % change PTP 2020 PTP 2019 PTP % change
0.38 0.43 -11.63% 5.91 6.71 -11.92% 209,419 225,690 -7.21%

Across all three metrics, these increases can be largely accounted for by moderate uplifts across several countries, rather than a barnstorming performance by any single individual nation. An exception, however, is Egypt. Its Tier 1 capital increased by 34.51% year-on-year, with a 55.85% uplift in pre-tax profits. The Egyptian government unveiled a major economic reform package in 2016 that aimed to stabilise the economy and give it a significant boost by fostering private sector driven growth. These efforts have been paying off, with Egyptian gross domestic product (GDP) increasing by 5.6% in 2019, compared to 4.6% in the previous three years, and the country’s banking sector is a likely beneficiary.

Aggregate Tier 1 capital, assets and pre-tax profits at African banks

T1 capital 2020 T1 capital 2019 T1 capital change Assets 2020 Assets 2019 Assets change PTP 2020 PTP 2019 PTP change
$86160m $75366m 14.32% $1068355m $965382m 10.67% 23,017 20,438 12.62%

Several of Egypt’s largest banks have significantly increased their lending activity since 2016, and while other factors are likely to be at play, and have also seen significant increases in pre-tax profits. Egypt’s largest bank, National Bank of Egypt, saw its pre-tax profits increase by 67.44% year-on-year and its second largest, Banque Misr, saw a 78.43% increase. In both cases this followed two years of shrinking profits. 

South Africa, however, continues to contribute the lion’s share of profits for the region, accounting for more than half of pre-tax profits raised across Africa. Of the country’s three largest banks, FirstRand had the best year, achieving a 12.29% year-on-year increase in pre-tax profits. A good result compared to largest bank, Standard Bank, which only saw a 1.41% increase; however, this is still a decent improvement on the year before when Standard Bank saw pre-tax profits decrease by 12.93%. Absa, which re-established itself as a brand following Barclays sale of its majority stake in the group in 2017, is yet to make a big mark; year-on-year its pre-tax profits increased by 2.89%, its Tier 1 capital has remained about level since 2017 with a 5% increase in assets.

The foreign exchange effect

Bank Country Actual rank Rank Excluding FX Depreciation
Banco Macro Argentina 685 505
Banco de Galicia Argentina 652 477
Banco Provincia Argentina 958 795
Banco de la Nacion Argentina Argentina 584 430
Banco Angolano de Investimentos Angola 913 761
Banco BIC Angola 915 763
Banco de Fomento Angola (BFA) Angola 861 715
Banco Hipotecario del Uruguay (BHU) Uruguay 808 749
National Bank of Uzbekistan (NBU) Uzbekistan 699 642
Banco de la Republica Uruguay 526 472
United Bank Pakistan 799 752
MCB Bank Pakistan 805 762
Allied Bank Pakistan 971 928
Habib Bank Pakistan 741 704
Bank Pasargad Iran 591 555
RBL Bank India 606 571
National Bank of Pakistan Pakistan 765 730
Anadolubank Turkey 998 966
Federal Bank India 502 471
Bank Alfalah Pakistan 997 967
Macquarie Group Australia 173 144
State Bank of Mauritius Mauritius 963 934
IDFC FIRST Bank India 481 453
ME Bank Australia 792 764
Banco Security Chile 817 789
Yes Bank India 473 448
Suncorp Metway Australia 418 395
Banco del Estado de Chile Chile 431 408
Banco BICE Chile 824 801
Banco Consorcio Chile 871 849
Newcastle Permanent Building Society Australia 910 888
MCB Group Mauritius 582 561
Bank of Queensland Australia 452 432
Akbank Turkey 172 154
TBC Bank Georgia 827 809
Bank of Georgia Georgia 888 870
Turkiye Is Bankasi Turkey 156 139
Banco Falabella Chile 834 817
VakifBank Turkey 201 185
Banco BHD Leon Dominican Republic 863 847
Banco Popular Dominicano Dominican Republic 742 727
Bendigo and Adelaide Bank Australia 371 357
Yapi Kredi Bankasi Turkey 193 180
Banco de Chile Chile 274 261
Turkiye Halk Bankasi Turkey 216 204
IndusInd Bank India 261 249
Banco de Reservas Dominican Republic 843 831
TC Ziraat Bankasi Turkey 114 104
Axis Bank India 131 121
Banco de Credito e Inversiones (BCI) Chile 258 248
HDFC Bank India 76 68
Kotak Mahindra Bank India 182 175
Commonwealth Bank Australia 49 46
ANZ Banking Group Australia 52 49
Westpac Banking Corporation Australia 53 50
ICICI Bank India 101 98
National Australia Bank Australia 55 53
State Bank of India India 57 55

Latin American moves

While Brazil continues to assert its economic dominance in Latin America, other countries are increasingly making an impact. Its banks still account for 54.88% of the region’s pre-tax profits, but this is a significant decrease from 82.75% a decade ago. Chile, Colombia and, in particular, Mexico have seen their share of regional profits increase in the last decade to 7.03%, 8.54% and 10.45%, respectively: almost doubling that of Chile’s share in 2010, more than double for Colombia and more than triple for Mexico.

The increase may be accounted for in the expansion of business lending undertaken by banks in these three nations. As an aggregate share of its gross loan book, just 34.43% of Brazilian bank loans are to corporate borrowers, a much bigger proportion go to retail customers. Whereas the inverse is true for Mexico, Chile and Colombia, where corporate borrowers account for 50.72%, 50.92% and 55.04% of the loan book, respectively.

Overall, 2019 was a difficult year for Latin America’s largest economy, which struggled with anaemic growth, as well as for its banks. Despite an impressive aggregate ROE of 18.83%, this did not translate into impressive profits for the Brazil’s banks, where aggregate pre-tax profits were down 4.58%. 2020 looks very unlikely to mark a turn in fortunes. At the time of writing, Brazil was the second-hardest hit country in the world from the Covid-19 pandemic, in terms of recorded cases and deaths. The handling of the pandemic has only sought to increase the level of conflict between Jair Bolsonaro’s government and state institutions, as well as state governors, making sure-footed progress on measures to improve the economy unlikely.

Mergers and acquisitions in Top 1000

Bank Country Tier 1 for previous ranking ($m) Buyer (country) Note
Dexia Kommunal Credit Germany 640 Helaba Bank (Germany) Tier 1 capital end 2018
Bank Danamon Indonesia Indonesia 2,430 Mitsubishi UFJ Financial Group (Japan) Tier 1 capital end 2018
Unipol Banca Italy 603 BPER Banca (Italy) Tier 1 capital end 2018
Alawwal Bank Saudi Arabia 3,879   Merged into Saudi British Bank
Thanachart Bank Thailand 3,220 TMB Bank (Thailand) Tier 1 capital end 2018
Denizbank Turkey 2985 Emirates NBD (UAE) Tier 1 capital end 2018
Charter Savings Bank UK 536 One Saving Bank (UK) Tier 1 capital end 2018
Union National Bank United Arab Emirates 4,980   Merged into ADCB to create Abu Dhabi Commercial Bank Group
Al Hilal Bank United Arab Emirates 1,522   Merged into ADCB to create Abu Dhabi Commercial Bank Group
SunTrust Banks US 19,306   SunTrust Banks and BB&T merged to create Truist Bank
TCF Financial Corp US 2,408   Merged into Chemical Financial Corporation
MB Financial US 1,959 Fifth Third Bancorp (US) Tier 1 capital end 2018
FCB Financial Holdings US 1,294 Synovus Financial Corp (US) Tier 1 capital end 2018
LegacyTexas Group US 935   Merged into Prosperity Bank
Beneficial Bancorp US 916 WSFS Financial Corporation (US) Tier 1 capital end 2018
United Financial Bancorp US 610 People's United Financial (US) Tier 1 capital end 2018
State Bank Financial Corporation US 588   Merged into Cadence Bank
Oritani Financial Bancorp US 520   Merged into Valley National Bancorp

M&A shake-up

There has long been speculation, since the financial crisis, about whether there would be a wave of consolidation activity in the US’s relatively fragmented banking market. The biggest banking merger and acquisition (M&A) transaction in 2019 – the merger between US banks, BB&T and SunTrust (previously 81 and 87 in the Top 1000 rankings) to form Truist Bank – has breathed new life into these discussions.

The merger, which was announced in 2018, created the 48th largest bank by Tier 1 capital in the Top 1000 ranking, with $40.7bn in Tier 1 capital to its name, and the ninth largest bank in the US. Some analysts believe the “merger of equals” between the two banks could provide a blueprint for other large regional banks in the US to follow, in order to create meaningful challengers to the US’s big four megabanks.

Although the SunTrust and BB&T merger was by far the largest in 2019, there were eight other M&A transactions between US banks including between Michigan-based Chemical Finance Corp and Minnesota’s TCF Financial Corp, as well as the acquisition of Illinois-based MB Financial by Ohio’s Fifth Third Bancorp.

Europe’s fragmented banking system has also long been the subject of speculation about potential consolidation, however, other than a few relatively small transactions in Italy, Germany and the UK, it was another year of inactivity. The acquisition of Turkey’s Denizbank by UAE-based Emirates NBD provided one instance of a reasonably large European transaction. Between 2012 and 2019, Denizbank was owned by Russia’s Sberbank and was its largest overseas asset. The sale, worth $2.7bn at the time of completion, was part of Sberbank’s shift back to focusing on its home market.

The second and third largest bank M&A transactions of the year came courtesy of the Middle East, continuing a wave of consolidation in the region in recent years. Between 2016 and 2020, this consolidation has resulted in the number of banks decreasing from 96 to 78 (this total includes the 68 Middle East banks listed in this year’s Top 1000 plus 10 Lebanese banks that we were unable to gather data from this year).

In the UAE, Union National Bank was merged into Abu Dhabi Commercial Bank Group (ADCB), along with smaller bank Al Hilal Bank, consolidating ACDB’s position as the country’s third largest lender, following a regional trend for the creation of megabanks. All three banks have a common shareholder in the Abu Dhabi Investment Council.

Saudi Arabia has also been drawn into the action, with Alawwal Bank merging with Saudi British Bank, which is 40% owned by HSBC and 60% by Saudi shareholders. It was the first banking sector merger within Saudi Arabia in 20 years and took about two years to complete, reflecting the relatively untested regulatory environment for bank mergers in the country.

Significant though this deal was, throughout 2019 it threatened to be overshadowed by a merger between National Commercial Bank, Saudi’s largest bank, and Riyad Bank, its fourth largest bank at the time the merger was announced in December 2018. However, a year later in December 2019, both banks announced without explanation the merger talks had ceased.

This deal’s collapse raises questions of whether the run of consolidation within the Middle East, which has been under way for several years, is running out of steam. The motives for further consolidation certainly remain compelling. The Middle East is still overbanked; cost pressures continue to bite in a climate of low oil prices, driving a desire for increased efficiencies; and there remains considerable ambition among the leading banks to take on bigger market share in the region and to make an impact internationally – and to do that, they need scale. However, many of the bigger deals that have completed successfully have involved two banks with common shareholders, making for a smoother process. Future deals without the benefit of existing relationships and a clear overlap in interests may be more difficult to achieve.

Latin America loan book composition (%)

  Financial institutions Corporate Government Retail
Brazil 8.59 34.43 4.52 52.45
Chile 4.07 50.92 4.07 40.92
Colombia 0 55.04 3.54 41.41
Mexico 2.27 50.72 14.75 32.25

The creation of so-called megabanks in Qatar and the UAE, and the increasing ambition of banks in these two countries, has drastically shifted the banking profits landscape in the region. Although Saudi Arabian banks continue to account for a large chunk of regional profits, representing 28.9% of pre-tax profits in the Middle East, it is no longer the region’s definitive leader. UAE banks now account for 27.25% of the region’s profits, up from 10.86% two decades ago, and Qatar’s share of regional profits have increased from just 2.33% in 2000 to 15.05% in 2020. By contrast, Israel’s banks have seen their share of regional profits fall from 22.56% 20 years ago to 9.89% today.

Top 10 banks with highest non-performing loan ratios

TOP 1000 Rank Bank Name Country Non-Performing Loans (NPL%)
976 Illimity Bank Italy 33.91
200 Piraeus Bank Group Greece 33.5
167 Alpha Bank Greece 30.1
319 Trade Bank of Iraq Iraq 29.93
855 Banco BMG Brazil 28.8
774 Provident Financial Group UK 26.9
658 Hellenic Bank Cyprus 25.8
432 Bank of Cyprus Cyprus 24.6
191 Eurobank Ergasias Greece 23.7
851 First Investment Bank Bulgaria 23.4
213 National Bank of Greece Greece 20.08

A taxing business

The amount of tax being paid by banks is an ongoing issue of considerable global interest, and our analysis suggests Australian banks pay the highest proportion as a percentage of net operating income, at 13.28% on average. Although Indian bank HDFC tops the table of individual banks paying a high proportion of tax, three Australian banks hold the second, third and fourth positions, with Asia-Pacific the leading region. It is perhaps relatively unsurprising that Australian banks are at the top of the table, given that since 2017 the country’s largest banks have faced an additional levy, which is paid on balance sheet liabilities. Of the 20 banks which pay the most tax, all are within Asia-Pacific or Europe.


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