Top 1000 World Banks - Loan-to-deposit ratios paint a positive picture

The loan-to-deposit (LTD) ratios measured in the 2019 Top 1000 World Banks ranking have, on the whole, moved in the right direction. This indicates that most banks’ attempts to strike a sound balance between ratios that are either too high or too low, in order to manage their liquidity, have generally succeeded in a challenging global context. In particular, varying regulatory and interest rate environments in a number of markets have impacted banks’ LTD metrics in recent times.

In Africa the regional average LTD ratio stands at 83.8% in the 2019 ranking, which marks a slight decrease from the 89.1% recorded in the 2018 edition. Nonetheless, the continent’s lenders still boast a healthy ratio in what is generally deemed as a prudent 80% to 90% band. In the Asia-Pacific, banks’ have increased their LTD ratio by a notable amount to 80.8% in the 2019 ranking, marking an increase of 5.6 percentage points. In central and eastern Europe, the region’s banks have experienced a slight decline in the 2019 ranking, dropping to 93% from 96.7%, while their peers in western Europe remain more or less stable with a ratio of 104.6%.

North American banks’ LTD ratio stands at 79.4% in the 2019 ranking, marking only a marginal increase on the 78.2% registered in the 2018 edition. But the biggest change in the current ranking exists for Latin America and the Caribbean. The region’s ratio fell to 111.5%, down from 120.1%. This represents a positive development for banks across this part of the western hemisphere, as they move towards a more stable liquidity position.

This generally positive regional story is also mirrored in the figures for LTD distribution ratios. An increased percentage of banks in the global ranking – 43.3% – reside within the 75% to 100% ratio bracket. The figure in the 2018 edition was 39.6%. Either side of this bracket, only marginal changes are registered. The percentage of banks with an LTD ratio of 75% or less stands at 27.7%, down from 30.4%. In the 100% to 125% LTD bracket, there is a slight uptick to 19.6% in the 2019 ranking from 18.9% in the 2018 edition. Meanwhile, an encouraging reduction of lenders with an LTD ratio of 125% or more has occurred, with the percentage dropping to 9.4% from 11.1%.

More movement in the LTD brackets can be detected at the regional level. In Africa the big change has come from banks moving from the 75% to 100% bracket to the 0% to 75% bracket. The 2019 ranking represents an almost exact swap from the 2018 edition with 50% of lenders now sitting in the lowest bracket, while 34% of banks are located in the 75% to 100% segment. Meanwhile, just over 9% of the continent’s lenders are located in the 100% to 125% bracket, with the remaining 6% positioned in the highest bracket of 125% or more.

For western Europe, the biggest change can be found in the 75% to 100% LTD bracket. In the 2019 ranking 26.6% of banks are located in this segment, up from 21.7%. Another notable change occurs in Latin America and the Caribbean, where close to an eight percentage points increase in the number of lenders positioned in the 100% to 125% bracket has occurred, bringing the total to 30.9%.

Loan-To-Deposit Ratio Distribution (% of banks in each bracket)