Emerging markets take profits crown

The ranking of the top 25 most profitable banks in this year’s Top 1000 World Banks is mainly an emerging markets story. It is heavily dominated by Latin American institutions, which account for 10 places in the top 25, four of which are Venezuelan.

Venezuela’s banks have performed particularly well this year on the back of limited competition and the 5.1% gross domestic product growth the economy enjoyed in 2012. Venezuela’s six banks in the Top 1000 posted aggregate profits of $5.38bn and the highest aggregate return on capital (ROC) of 54.23% of all Latin American countries.

Along with Banco de Venezuela in fourth position, there are two other Latin American banks in the top five, including Peru’s Banco de la Nación in third position with an ROC of 62.38% and Colombia’s Banco Agrario de Colombia in fifth position with an ROC of 59.48%.

Colombia’s banking sector posted a 50.84% increase in aggregate profits to $4.62bn, while Peruvian banks posted a 19.9% rise in profits to $1.49bn.

Asia-Pacific banks also posted good gains in ROC in the top 25 most profitable banks, with one Papua New Guinean bank, one Pakistani, two Indonesian, one Malaysian, one Sri Lankan and one Bangladeshi bank. At 56.73%, banks from the Asia-Pacific region comprise the largest share of global pre-tax profits in this year’s Top 1000 ranking.

In second position in the ranking is Papua New Guinea’s Bank of South Pacific, with an ROC of 68.69%. Both the bank’s profits and assets increased by 16% to a respective $254m and $6.3bn. Electronic banking was a key driver of the bank’s growth this year – with more than 70 million transactions processed through all its electronic and mobile phone channels.

Meanwhile, the eurozone debt crisis is still weighing down on the profitability of western European banks, with their share of pre-tax profits standing at just 1.59%, lower than Africa, whose share of pre-tax profits stands at 2.3%. 

However, this did not stop Italy’s Banca Mediolanum from claiming the top spot and posting the highest ROC of 68.81% of all the banks in the Top 1000. Mediolanum’s net profit in 2012 rose by 207% to $571m, boosted by fee and commission business (accounting for 55.7% of operating income), asset revaluations and carry-trade profit after tapping about Ä3bn of the cheap cash offered by the European Central Bank and investing it in higher yielding Italian government bonds.

On an aggregate basis, all regions posted more than 15% in ROC, except for North America, which had an ROC of 13.12% and Europe, which recorded an ROC of just 0.54%.