It has been a challenging year for western European banks. Five years ago, banks from the region accounted for 58% of total Top 1000 assets and 46% of profits. This year they still account for 45% of assets but only a meagre 6.3% of profits. This is down from just under 25% of profits in the 2011 ranking, showing how the eurozone crisis has really bitten in the past 12 months.
HSBC leads the pack in Tier 1 capital terms being roughly 50% larger than its nearest rival, second placed BNP Paribas, and having the benefit, of course, of a diversified earnings base with major operations in Asia, Latin America and the Middle East. HSBC also benefits in these challenging times from its conservative funding strategy, with a loans-to-deposit ratio of 83%.
While HSBC has increased its Tier 1 capital by $6.4bn, most banks in the Top 25 Western European Banks ranking have seen values either flatlining or falling a little. This indicates a general deleveraging trend as well as the difficulties of raising new capital.
The exceptions have been banks that have been recapitalised by their governments, such as some of the Irish banks, or, in the case of the Italian banks, the result of a determined piece of capital raising which took precedence over pricing or the dilutive impact.
As a result, Allied Irish Banks saw a 244% increase in its capital, making it the highest mover among western European banks, while Irish Life & Permanent is second in the top 10 highest movers with a 59% uplift in Tier 1. Three Italian banks appear in this ranking – Cassa di Risparmio di Ferrara, Banca Popolare di Milano and Banca Monte dei Paschi di Siena.Intesa Sanpaolo moved from 16th to 14th in the Top 25 Western European Banks ranking by taking its Tier 1 up from $41.7bn to $48.2bn.
Netherlands-headquartered Home Credit saw its Tier 1 capital increase 38%, giving it third place in the highest movers ranking. This impressive performance reflects its fast-growing consumer credit business in Russia, eastern Europe and China.
There are eight new entrants from western Europe in the Top 1000, including three from Spain, Italy’s Banca Mediolanum, Iceland’s Arion Bank and Dexia Bank Belgium (Belfius), which is the Belgian part of the restructured Dexia that was purchased by the Belgian government in October 2011. Belfius places 119th in the Top 1000.
Western European banks face further headwinds over the next year or so as eurozone governments argue about how to reorganise the single currency area, ratings agencies continue with their downgrades and sovereigns struggle under rising debts and recession.
