Bank atlas 250 – results tables:
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Last year was a rotten one for most banks, as corporate lending, equity underwriting and merger activity sagged. Fifteen of the top 20 banks saw profits fall year on year, 10 of these by double-digit amounts. Net income fell for 30 out of the 42 largest US firms in the table; for 32 out of 41 Japanese, and all but one of the 16 Italian financial groups indicated. With revenue growth in trouble, banks are looking to pare costs – for which read redundancies.
Following the Bank Austria acquisition, HypoVereinsbank rockets up the rankings of largest banks by shareholders’ equity to ninth place. Deutsche is now contesting fifth place with JPMorgan Chase but takes a big hit on profits as provisions against the third-quarter losses of DaimlerChrysler.
For the third year in a row Citigroup is the largest bank in the world, as measured by shareholders’ equity. It is also one of the most profitable, with a cracking $14.1 billion net income in 2001, up 4% on 2000 and more than the combined profits of the next two most profitable banks – Bank of America and HSBC. The largest single profit items were $2.4 billion in disclosed underwriting fees and $2.1 billion from its North American credit card business. But $698 million (pretax) was lost from credit exposures and trading positions related to Enron and Argentina, with more to follow in 2002.
Citigroup’s purchase of Banamex for $12.5 billion was the largest Latin American deal involving a US-based acquirer.
China, Spain and South Korea were the major exceptions to the general gloom. In April Moody’s raised the long-term senior debt and deposit ratings for Kookmin Bank, Hanvit Bank, Chohung Bank and Korea Exchange Bank.
China’s big four banks were recapitalised in 1999 by transferring NPLs amounting to Rmb1.4 trillion to four Asset Management Companies (AMCs). In January the governor of the Chinese Central bank, Dai Xianglong, announced that NPLs stood at Rmb1.8 trillion (US$217.6 billion). That represents 26% of total loans in October 2001, down 3.81 percentage points from 2000.
Asset quality remains the primary hurdle to a planned listing of Industrial and Commercial Bank of China (ICBC). In April the bank revealed its non-performing loan ratio for the first time. The ratio stood at 29.8% of outstanding loans at the end of last year. State-owned enterprises (SOE) still make up more than 80% of the loan portfolios of the big four and estimates of current bad debt levels remain precisely that – estimates.
Across the straits, Taiwan’s overpopulated and fragmented banking industry is coming under increased pressure as the island’s economy takes a turn for the worse, making the sector more vulnerable to the danger of a domestic financial crisis. Stock market jitters and a stagnant property market have already pushed up the banking system’s bad loan ratio to 9.9% in 2001, as collateral devalues.
Early this year Santander Central Hispano successfully bid for Banespa’s minority interests, increasing the total holding to $8.8 billion. Despite substantial loss provisions to cover their investments in Argentina, Spanish banks have offset these by a higher contribution from other Latin American subsidiaries and by extraordinary capital gains.
Forty-four banks made profits of in excess of $1 billion last year. Of these 14 are American, six British, and three Canadian. In size, 24 banks have assets above $20 billion, compared with 21 last year.
Since 1999 only two of the current top 25 non-Japanese banks have managed to raise returns on equity. BNP Paribas from 7.4% to 14%, and Credit Suisse from 2.3% to a still limp 4.1%. BNP has combined stern cost control with a reorientation towards more profitable retail banking and asset management , to which 56 % of assets are now devoted, compared with 47.5% in 1999.
Deutsche’s exposure to DaimlerChrysler’s losses resulted in a third-quarter 2001 write-down of e6 billion. Deutsche, Commerzbank and pre-acquisition Dresdner Bank have the fourth, fifth and sixth lowest reported profits and profit growth in the top 50.
Averaging on a country-by-country basis over all banks listed in Bank Atlas, Germany has the ninth lowest ROE for the 107 countries for which data has been provided. It now ranks between Taiwan (eighth lowest) and Oman (tenth lowest). Profit levels supported in the past by buoyant investment banking and asset management revenues have collapsed since equity markets slumped.
Slow domestic economic growth and the distorted retail sector have highlighted the importance of cost control in improving returns on German banks’ enormous asset base.
In terms of equity returns Italy is even worse than Germany, ranked on average institutional performance between Japan and Cyprus and only two places higher than Belarus. The largest Italian banks by shareholders’ equity are IntesaBci (36) and UniCredito Italiano (44), still small by international standards. While Italian banks saw very strong growth in asset management and bancassurance products in 1999-2000 fee income dried up with the downturn in equity markets.
