Tuesday, 31 January 2023

Bank Watch List

Balance sheets and financial results-based evaluations are by nature and definition backwardlooking. To overcome this, we introduced a forwardlooking element called the “Bank Watch List” into the strongest bank evaluation.

It identifies and considers the impact of specific evaluation parameters on balance sheet strengths, should macro-economic and business conditions change. By identifying the parameters and institutions that are most likely to be impacted by such changes, we aim to provide a holistic 360 degree view of the ranking without materially changing the composition of the scorecard.

2021 2020 2019
Strength Rank 2018 AB 500 Rank 2018 Commercial Bank Country Gross NPL Ratio (%) Loan Loss Reserves to Gross NPLs (%)
371340Sonali Bank Bangladesh35.1 29.5
142-IDBI Bank India28.0 47.7
197175Indian Overseas BankIndia25.5 45.4
220183UCO BankIndia24.9 49.4
295267United Bank of IndiaIndia24.1 37.5
278240Bank of MaharashtraIndia19.5 47.0
6459Punjab National BankIndia18.7 43.9
206170Oriental Bank of Commerce India17.7 44.9
213173Corporation Bank India17.4 36.6
436403Janata Bank Bangladesh16.4 39.5
8178Canara BankIndia11.9 39.7
158149Syndicate BankIndia11.6 47.5
343336Punjab & Sind BankIndia11.2 40.4
380357Jammu & Kashmir Bank India10.1 46.0
489472Lakshmi Vilas Bank India10.0 43.4

Source: Asian Banker Research, S&P Global Market Intelligence

What does it mean to be in the Bank Watch List?
In this year’s ranking, we have identified gross nonperforming loan (NPL) ratio (above 10%) and loan loss reserves to gross NPLs ratio (below 50%) as parameters that will impact financial strength due to fluctuations in macroeconomic and business conditions. The “Bank Watch List” is a tool to monitor and review parameters in order to give a holistic view of financial strengths and the institutions being evaluated.

Who are in the Bank Watch List?
Thanks to the measures taken to tackle bad debts, the asset quality of banks in most Asia Pacific markets remained stable or showed signs of improvement in the financial year 2017, with the exception of countries such as India, Singapore and Malaysia. Among all the 19 countries and territories, banks in Bangladesh and India recorded the lowest scores in asset quality.

Indian banks saw their asset quality weaken the most, due to the revised framework that tightened norms for the resolution of stressed assets. The public sector banks in India account for a major share of total bad loans, and the weighted average gross non-performing assets (NPA) ratio of Indian public sector banks in AB500 deteriorated to 14.6% in financial year ended 31 March 2018 from 11.6% in the previous year. The higher provisions they need to set aside for their bad assets led to the huge net losses in the Indian banking sector. The weakness in asset quality will continue to put significant pressures on Indian banks’ profitability and capital positions. However, the acceleration of cleaning up of their balance sheets will benefit the Indian banking system in the long run.