Japan’s banks feel the strain, but MUFG remains on top

The 2022 Top 1000 World Banks ranking will not be happy reading for the Japanese banking sector. Mitsubishi UFJ Financial Group (MUFG) has slid out of the top 10 for the first time since 2010. The bank, which ranked 10th in 2021, has fallen to 12th with a 12.4% drop in Tier 1 capital.

MUFG had been the sole Japanese bank to hold a place in the top 10 for the past 11 years. Its fall means Chinese banks are now the only Asian banks represented in this elite group.

Similarly, Sumitomo Mitsui Financial Group, which was the only other Japanese bank in the top 20 last year when it placed at 16th, has fallen to 21st with a 9.7% drop in Tier 1 capital.

There is little change in the country ranking, with the top 12 retaining their positions from 2021. The first change is Fukuoka Financial Group, which climbs from 15th to 13th place, despite seeing a 1.6% decline in Tier 1 capital.

Of the 85 banks in the Top 1000 for 2022, 74 saw a decrease in their Tier 1 capital. The yen’s plummet in 2021 – it lost 10% of its value against the dollar – has much to do with the contraction in Tier 1 capital, as The Banker converts all of the Top 1000 figures into US dollars.

Shinhan Bank Japan saw the biggest increase in Tier 1 capital at 9.1%, but as a foreign-owned subsidiary it does not appear in the main Top 1000 ranking. Of the banks that do appear, the biggest increase came from Hekikai Shinkin Bank, located in the central Aichi prefecture, which saw a 7.2% increase in Tier 1 capital. This boost helped the bank to climb from 607th to 592nd in the main ranking. But when pre-tax profits are assessed, Tokyo Kiraboshi Financial Group comes out on top, with a 176.6% increase in profits.

Looking at the best-performing table, there is better news for MUFG – it is the best-performing lender of the 10 largest Japanese banks. The bank scored well for return on risk, profitability and liquidity. Norinchukin Bank, the second-best performer, also scores well in profitability and liquidity, as well as soundness and leverage, but is let down by finishing last in return on risk and growth.

Looking at the results for return on assets (ROA), it is the 601st-placed Seven Bank which achieves the highest ratio in Japan, of 1.69%. However, the results for the other top five banks for ROA gives some insight into the difficult situation facing the country’s banking sector: all report a less than 0.5% ratio.