The World’s Top Banks

Who are the Winners and Losers Among the Largest and the Best Banks in the World?

New York, United States, 25 June, 2009 – UPDATE. The world’s pre-eminent banking magazine, The Banker, is in the process of releasing its annual list of the top 1,000 world banks.

Although full details are not yet available, EconomyWatch.com understands that its broad findings support the analysis we published earlier in the month.

Who are the Winners and Losers Among the Largest and the Best Banks in the World?

New York, United States, 25 June, 2009 – UPDATE. The world’s pre-eminent banking magazine, The Banker, is in the process of releasing its annual list of the top 1,000 world banks.

Although full details are not yet available, EconomyWatch.com understands that its broad findings support the analysis we published earlier in the month.

According to the preliminary report, JPMorgan is the top bank in 2009. The top five banks of 2009 are:
1. JPMorgan Chase (up from fourth spot in 2008)
2. Bank of America
3. Citigroup (with the second biggest loss of 2008 at $53 billion)
4. Royal Bank of Scotland (who reported the biggest loss of the year in 2008, losing $59.3 billion)
5. HSBC (down from first in 2008 – but it was the only top 5 bank not to receive government support, and would have ranked third without that)

Mistubishi UFJ of Japan came in at seventh, the highest ranked Asian bank, with ICBC of China in eight – also one of the highest gainers and the most profitable bank in the world, with estimated profits of $21.3 billion.

Profits of the global banking industry plummeted to $115 billion in 2008 from $781 billion in 2007, a 85 per cent decline.

Zurich, Switzerland, 3 June, 2009. The world’s top banks have been through its most tumultuous period in 80 years as the subprime crisis became a full-blown meltdown. [br]

We all know the names of the deceased, the firesale fodder and the government owned, from Bear Stearns to Lehman Brothers, Wachovia to Wamu, , from Northern Rock and Bradford & Bingley to Fortis, and in pseudo bank-land from AIG to Fannie and Freddie.

Much less attention to date has been paid to the large banks that have staid boring, executed tightly and grown their business prudently even as the world came crashing down around banking’s ears.

Being able to define the world’s top banks was once very easy: whoever was biggest was best. This was usually measured in assets under management, and was built on the fatally flawed assumption that all assets are created equally, and that they won’t decline in value en masse.[br]

In these all together more prudent times, big often means bad, so quality of assets, cashflows and management become all important. There are too many variables involved, with too little information about the real price of many legacy assets, to be able to create a 2009 league table of the top banks, replete with numerical ranking formula.

Instead we will list the banks that we and our colleagues rate as having played the smartest hands and come out winners – at least with the information available to today. Tip of the hat to the Economist for their inputs.

JPMorgan Chase

In the past, banks that were conservative and focused more on minimizing risk than maximizing profits were likely to get hounded by analysts. Now they are considered stars. JPMorgan Chase is one of those entities. It stayed clear of sub-prime loans and cultivated deep client relationships and analytical tools to reduce default rates. With its massive credit card portfolio, it will need to run an even tighter ship this year – but if it pulls it off it is likely to take over the mantle of the world’s top bank for Citigroup.

Credit Suisse

Credit Suisse was an early victim of toxic assets, but it moved quicker than competitors to get those off its books or write off completely. It was also quick to raise money (when money was available on comparatively better terms) and to re-structure its investment banking arm. It has left UBS in the dust.

Goldman Sachs

Its funny isn’t it? Whenever the government is looking to do a deal with a financial services firm, Goldman Sachs is usually there or there-about. Called in normally by former colleagues now working for the government. With its political access and complex risk management software that has withstood the storms, Goldman has crowned its position as the best former investment bank. However the fact that it had to change from an investment bank to a deposit-taking commercial bank shows that even the mighty have weaknesses.

Blackstone Group

In any industry shakeup, new power players emerge, and the Blackstone Group may be the key mega entrant of the Financial Crisis. It is not really a bank, being a collection of funds, advisory groups and financial software solutions, but it is increasingly serving bank-like functions in funding and co-ordinating transactions, and like Goldman’s it has access to Washington that is bringing in contracts worth billions, sometimes in no tender bids. Expect Blackstone to expand assets under management and services offered.

Banco Santander

Spanish financial watchdogs ensure their banks take counter-cyclical measures, building up capital during the good years. This cushioned allowed the largest, Santander, not only to survive, but to buy up banks including ABM Amro and assets at firesale prices while maintaining profitability.

Standard Chartered Bank

Standard Chartered, or StanChart, focuses only on emerging markets. After the Asian Financial Crisis, most of these countries enforced stricter lending rules, meaning no subprime. Their economies are also growing overall, so organic growth is the order of the day.

Rabobank

A ‘wonderfully dull’ Dutch bank that has always operated very conservatively, taking very few risks and building up long-term low leverage portfolio positions. Previously considered a laggard, now hailed as far-sighted.

Bank of New York Mellon

Bank of New York Mellon provide custodian services and do not put their own capital at risk in the same way as regular banks. Not only does that mean no toxic assets, it is also a rapidly growing arm of finance.

BNP Paribas

BNP Paribas has a major chunk of business in France, which has not suffered from the worst of the ‘Anglo-Saxon’ excesses. It is also growing strongly in equity derivatives, and area that has not (yet) been hit by big losses.

Industrial and Commercial Bank of China (ICBC)

China is now the largest creditor nation in the world, and their banks have solid books with rapidly growing assets under management. If China stays on course to become the world’s largest economy, ICBC as the largest -and state owned – bank could well become the world’s biggest bank.

Other major Chinese banks to watch out for include CITIC Industrial Bank, Agricultural Bank of China, China Construction Bank and China Merchants Bank.

Hosni Afleck, EconomyWatch.com