La revista ´The Banker´, publicación especializada en el sector financiero del Grupo Financial Times, ha situado a Bancaja en el puesto 101 del ranking mundial de entidades financieras que realiza anualmente, y que ha publicado en su número especial del mes de julio. Este puesto supone una mejora de 63 posiciones frente a la obtenida en el ranking del pasado año, en el que la entidad alcanzó el puesto 164, informaron este jueves fuentes de la caja valenciana en un comunicado.

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Banks may be suffering as the credit crunch bites, but the past year shows the industry has the resilience to stop a setback turning into a disaster. By Stephen Timewell.
Research by Terry Baker-Self, Valentina Lorenzon & Beata Ghavimi.


The 2002/07 period represents the greatest economic boom the world has seen, and in the four years to end-2006 the world’s banks continued to produce record profits and increased profitability year on year. But in 2007, the onset of the US subprime crisis and the subsequent financial crunch forced many banks, such as Citigroup and UBS, into meltdown. So did 2007 spell the end of the global banking bonanza and the beginning of a long bleak period for banks, or is the current financial crisis and economic slowdown just a US and European phenomenon and a mere blip in the financial industry’s ongoing global charge?

While analysts argue how the decline in real growth in the US economy from 2.9% in 2006 to 2.2% in 2007 and into possible recession this year will impact globally, The Banker’s 2008 Top 1000 World Banks rankings indicate that the banking industry is far more resilient than crisis headlines suggest.

The Banker’s 2008 ranking (based around end-2007 results) shows the aggregate pre-tax profits of the Top 1000 banks were hit by the downturn, but not dramatically. While aggregate profits rose by about 20% in each of the previous four rankings (21.9% last year), profits in the 2008 ranking stayed flat, decli*n*ing by 0.7% to $780.8bn compared with $786.3bn last year. While Citigroup, UBS and some other big banks showed some heavy losses in their 2007 results, this was lar*gely compensated for by banks unaffected by the subprime crisis, esp*ecially in Asia.

Yes, there was a slowdown, but definitely not a collapse; aggregate profits dipped $5.5bn overall to $780.8bn, still well above the levels of two years ago. And although aggregate bank profitability (pre-tax profits to Tier 1 capital) suffered, it still hit a handsome 20.0%: down on last year’s record 23.4% but above the 19.9% in our 2005 rankings.

And despite the bleak economic picture at the end of 2007, there was still substantial growth in aggregate Tier 1 capital and aggregate total assets as the banking sector across the globe strengthened capital as balance sheets kept expanding.

Total Tier 1 capital grew by 15.9% to reach $3,899.4bn, only slightly less than last year’s growth rate of 18.4%. And asset growth was the highest in four years, reaching 21.6% and expanding to a record $90,256bn, more than double the size of aggregate banking assets in the 2003 ranking.

This huge asset growth saw big changes among the major banks, with Royal Bank of Scotland catapulting to the top spot with total assets of $3807.9bn, a whopping 122.6% increase as a result of incorporating parts of the acquisition of ABN AMRO. Deutsche Bank motored into second place doubling its assets to $2974.2bn, and the four big Chinese banks continued to expand, growing by 23.6% to reach a combined asset total of $3740.6bn.


Subprime effects



While some of the impact of the US subprime crisis and the credit crunch can be seen in the 2008 listings, it is not the whole picture, as a lot more financial damage has emerged in recent months that will only be seen fully in our 2009 rankings. In analysing the bank write-downs/credit losses and capital raised since the beginning of 2007 until end-May 2008, the Washington-based Institute of International Finance (IIF) calculates that the total worldwide bank losses during this period amounted to $386.7bn, with the total capital replenishments reaching $276.4bn (see page 142 for bank breakdowns).

The total losses here, only partially reflected in 2007 bank results ($235.6bn applying to calendar 2007), show that the Americas and Europe took the biggest hits with $165.7bn and $199.6bn respectively, followed by Asian institutions with a modest $21.4bn. The capital replenishments follow a similar pattern with the Americas and Europe raising $141.3bn and $125.5bn respectively, followed by Asia with $9.6bn.

How high the write-downs and losses will go remains to be seen but, according to recent Bloomberg and Accenture research, estimates of such losses could go well beyond the $380bn at end-May 2008 and could reach a total of $1200bn. Interpretation, however, is key to understanding the impact of the credit crunch on banks’ results, and in particular what goes to reserves and what hits the income statement.

Reporting is complex and John Tattersall, partner at PricewaterhouseCoopers (PwC), explains: “Readers of financial statements need to look at both the impairment charge and profits or losses on trading activities in a bank’s income statement, and also the movements on the ‘available for sale reserve’, a component of equity, to understand the true impact of the decline in the fair values of securities in 2007 on a banking group’s net worth. The dividing line between falls in value treated as impairments and those taken to reserves is often a subjective one, fiercely argued over between banks and their auditors.”

Meanwhile, the US banks have taken a battering as a result of the financial crisis and profits in the 2008 Top 1000 listing were down more than 40% on the previous year to $112.8bn. The critical aspect is that the role of US banks, which was once dominant, is in serious decline.

US banks’ profits in the 2008 listing were just 14% of the Top 1000 World Banks aggregate profits, compared with 24% last year and a huge 49% five years ago in The Banker’s 2003 listing. The role of US banks is also slipping in other areas – in the 2008 listing aggregate, Tier 1 capital slipped to 16% from 19% the previous year and aggregate assets fell to 11% from 13% in the 2007 listing. And in aggregate terms on profitability US banks usually lead the world, but this year have fallen to a 17.9% average return on capital, below the reduced global average return on capital of 20%.

Are US banks losing their grip? Some will argue that they will bounce back, and Citigroup’s profits of just $1.7bn will not be repeated. Perhaps so, but the trend suggests that banks outside the traditional developed world are growing, and the dominance by US banks and also the Europeans is diminishing. For example, the number of US banks in this year’s listing fell to 169 from 185 last year and from 210 banks five years ago in the 2003 listing.


Rise of Asia


Are the EU(27) banks being squeezed too? Despite significant write-downs and losses in the financial crisis by European banks (see page 142) the 266 EU(27) banks in this year’s listing, compared with 279 last year, managed to maintain their share of the Top 1000 World Banks in all areas. The EU(27) banks held on to 42% of aggregate Tier 1 capital, 53% of aggregate assets and 41% of aggregate profits despite the crisis. In terms of profitability, EU(27) banks, at 19.7% return on capital, were down but close to the global 20.0% average.

The 184 Asian banks, up from 174 last year, now account for 19% of Top 1000 profits, up from 12% last year, with Tier 1 capital up to 15% from 14% and assets steady at 12% of the Top 1000 aggregate. One cannot ignore that there are three Chinese banks in the world’s top 13 banks whereas five years ago there were none, and Asian banks (excluding Japan) accounted then for just 10% of profits.

While the role of the 98 Japanese banks in the Top 1000 remains flat or in decline, accounting for 10% of capital, 9% of assets and 6% of profits, other regions, such as the 97 Middle East and 47 Latin American banks are expanding but from very low bases. Middle East profits have risen from 3% to 4% of the Top 1000 and Latin profits have doubled to 4%.

Meanwhile, the battle to head the Top 1000 World Banks ranking, based on Tier 1 capital, took some significant twists and turns as US banks lost their ascendancy and UK banks surged ahead. This year UK-based HSBC Holdings took the crown as the world’s largest bank after nine years of US domination, with an eight-year reign by Citigroup until 2006 and Bank of America edging ahead last year.

HSBC roared into first place with a 19.5% expansion of Tier 1 capital to $104,967m, well ahead of Citigroup which remained second but whose capital slipped by 1.8% to $89,226m. From eighth place last year, Royal Bank of Scot*land rocketed into third this year with capital jumping a huge 47.7% to $88,888m as a result of the ABN AMRO acquisition. RBS now becomes one of the six titans, pushing out France’s Credit Agricole Group while Bank of America drops from leadership to fifth place with a sizeable 8.4% decline in capital.

How did the six biggest banks perform in relation to last year and in relation to the Top 1000? This year the big players were not taking their usual bigger share in all areas and declined in terms of capital and profits. In 2008, the six accounted for 13.8% of Tier 1 capital, 17.5% of total assets and 12.8% of profits, compared to last year’s 15%, 13.4% and 16.6% respectively. In comparative terms, the big do not always get bigger and while the titans account for significantly more assets, they slipped in terms of relative volumes of capital and profits this year.

The Top 25 rankings provide another view of how the bigger banks have fared. These large banks in the 2008 rankings accounted for 37.4% of aggregate Tier 1 capital, 44.1% of aggregate total assets and 38.6% of aggregate profits. Similar to the six titans, the Top 25 percentages demonstrated similar shifts, with assets growing and capital and profits declining as an overall proportion; last year’s ratios were 40.9% (capital), 42.8% (assets) and 40.8% (profits).

The 10-year asset growth picture shows that the Top 25 banks have continued to expand their share of the Top 1000 market year after year, rising from 32.4% in the 1999 ranking, to 42.8% in 2007 and 44.1% in 2008. As banking consolidation increases, this trend looks set to continue.


Regional change


In this Top 1000 analysis, The Banker also provides a Top 25 listing based on market capitalisation data as at June 12, 2008 (below). This year’s market capitalisation listing looks very different to last year’s and also differs significantly from the Tier 1 ranking. This year, China’s three largest banks, led by ICBC, take three of the top four places, asserting China’s increasing role on the world stage, and last year’s market leader Citigroup drops to ninth following its massive share price fall. As US banks slip down the table, banks such as the Chinese and Spain’s Banco Santander (seventh) are taking the leading positions. HSBC, the leading bank by Tier 1 capital, maintained its third-place ranking in this table.

This year’s regional winners list (see page 145) reflects key changes with HSBC Holdings retaining its place in Europe and Brazil’s Banco Bradesco the new leading Latin bank. In terms of assets, Royal Bank of Scotland leapt ahead, with a balance sheet more than 25% bigger than its nearest rival, Deutsche Bank.

Looking closely at the Top 1000, the 2008 ranking includes 83 new entrants, 45 last year, with China Everbright Bank heading the newcomers at 195th place (page 166) and in terms of the fastest movers (page 165) 79 banks moved up more than 100 places in the listing led by Nigeria’s Oceanic Bank, which leapt a staggering 565 places to 310th place.

Looking to the future, the four-year onward march of expanding bank profits and profitability has been halted, and the 2008 ranking reflects the impact of the financial crisis that began last August and has yet to be fully played out. Given the reduced global economic outlook for 2008, with growth estimated by Fitch Ratings at 2.6%, and major concerns about growth in the US and UK, 2008 bank results look flat at best in developed markets, with emerging economies likely to pick up the slack.

The 2008 Top 1000 shows that the banking bonanza, which began in 2002, is still alive, if a little battered, with prospects still bullish but coming from new players. The traditional banking landscape, dominated by the US and Europe, is shifting.

The Banker’s rankings usually refer to previous-year figures but, given the unfolding nature of the credit crisis, the highest write-downs and credit losses table (below) refers to the past 18 months. The data has been provided by the IIF and is also based on Bloomberg calculations.

The total amount of write-downs and credit losses since the beginning of 2007 is $386.7bn, the biggest proportion of which has been suffered by European banks. The amount of capital raised in the past 18 months does not quite match that value, and totals $276.4bn. In this case, US banks increased their capital more, with $141.3bn; followed by their European peers, with $125.5bn; and Asian banks, with $9.6bn

Although aggregate figures show that the European banks have suffered the most from the subprime-fuelled crisis, the list of Top 25 write-downs and credit losses is, unsurprisingly, led by Citigroup. The New York-based bank is followed closely by Swiss UBS and by another player headquartered in the US, Merrill Lynch. Citigroup also leads the ranking by total capital raised in the same period, $44.1bn, followed by UBS with $28.8bn and Royal Bank of Scotland with $23.7bn.

HSBC heads the UK banks ranking by total write-downs and credit losses with $19.5bn. Its capital injection for the period was $3.5bn. Despite the hit from the credit crunch, HSBC managed to lead the global Top 1000 ranking by Tier 1 capital ($105bn). Its $25bn pre-tax profits were also unmatched and, according to the bank, which reports twice a year, its 2008 first quarter results were higher than the previous two years’ – although no figures were available – due to booming markets in Asia, the Middle East and Latin America.

TOP 1OOO World Banks 2008 - The Banker

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¿Y esto quiere decir que es un lugar moderadamente seguro para meter las perras en el dépósito de bienvenida a un mes al 10% que ofrece?

¿Os parece una caja fiable, para al menos un mes?

Un saludo.