Sep 21, 2013
• Hang Seng Bank has strongest bank balance sheet in Hong Kong and the Asia Pacific region.
• Average total capital adequacy ratio of the largest 500 banks reached 14.6% in 2012.
• Average non-performing loans (NPL) ratio of the largest 500 banks increased to 2.58% in 2012.
Singapore, 21 September 2013 - The Asian Banker 500 (AB 500) Strongest Bank Balance Sheets Ranking 2013 found that the average capitalisation of the largest banks in the region improved in 2012 with Hang Seng Bank having the strongest bank balance sheet in Hong Kong and the Asia Pacific region.
The AB 500 ranking is the most comprehensive annual evaluation that captures the quality and sustainability of the balance sheets of banks in the region. It tracks the relative financial strengths of banks in response to their respective market conditions, based on a common scorecard.
It is modeled on a transparent balanced scorecard approach, weighted against six crucial elements, such as: scale of operations, balance sheet growth, risk management, profitability, asset quality and liquidity.
Hang Seng Bank has strongest bank balance sheet in Hong Kong and the Asia Pacific region
Hang Seng Bank topped the ranking this year in the region on the back of stronger asset and profitability growth.
“Hang Seng Bank demonstrated strong and resilient growth and performed above its peers across the six parameters in our assessment of the quality and sustainability of its balance sheet,” Foo Boon Ping, managing editor of The Asian Banker.
This year’s Top 10 strongest bank balance sheets are represented by players from Greater China and Southeast Asia, including Hong Kong (3), China (3), Macau (1), Singapore (2) and Malaysia (1).
Average total capital adequacy ratio of the largest 500 banks reached 14.6% in 2012
The latest ranking found that the average total capital adequacy ratio of the largest 500 banks stood at 14.6% in 2012, up from 14% in 2011, as they prepared to meet new Basel III regulatory capital requirements.
Hang Seng Bank tops strongest bank balance sheets ranking in Hong Kong and the Asia Pacific region
Figure 1. AB 500 top 10 Strongest Bank Balance Sheets
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Figure 2. Top 10 Hong Kong banks in AB 500 rankings
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Increased capital inflows into the region over 2012 have helped shore up banks’ capitalisation. Asian markets have been awash with liquidity for the past few years. This has helped kept interest rates low, driven unprecedented credit demand and beefed up banks’ overall capital positions.
“Banks in the region have benefited from the excess liquidity in the past few years to grow their balance sheets and capitalisation. However, we have observed a slowdown in growth in 2012.” said Foo.
Average non-performing loans (NPL) ratio of the largest 500 banks increased to 2.58% in 2012
Average non-performing loan (NPL) ratio of the region’s largest 500 banks increased from 2.51% in 2011 to 2.58% in 2012, whilst the average loan loss reserve to gross NPL ratio dropped from 246% to 163%.
Overall, Asian banks face the potential of asset quality deterioration in the next two years, reaching a turning point in the current relatively benign credit cycle.
Over the past few years, debt levels in the Asia Pacific region have increased, mainly due to robust economic growth and a low interest rate environment. The significant rise in property prices also poses additional risk to overall financial stability in the region.
Overall, the aggregate strength score has decreased as performance in key parameters such as profitability growth, liquidity and asset quality moderated from the previous year. Average score for all 500 banks declined from 2.53 to 2.49. The highest strength score this year at 4.19 is lower than last year’s 4.31.
Out of the 19 countries and territories covered in the rankings, 11 saw their banks’ average strength score decrease. Singapore had the highest country average strength score at 3.58, followed by Hong Kong at 3.20.