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.
|Strength Rank 2019||AB 500 Rank 2019||Commercial Bank||Country||Gross NPL Ratio (%)||Loan Loss Reserves to Gross NPLs (%)|
|384||203||Indian Overseas Bank||India||22.1||55.8|
|477||160||Central Bank of India||India||19.3||61.6|
|346||296||United Bank of India||India||16.5||51.2|
|460||275||Bank of Maharashtra||India||16.4||70.0|
|437||68||Punjab National Bank||India||15.9||61.4|
|450||88||Bank of India||India||15.9||64.9|
|470||111||Union Bank of India||India||15.0||57.2|
|237||314||National Bank of Pakistan||Pakistan||12.7||99.7|
|415||193||Oriental Bank of Commerce||India||12.7||55.8|
|473||347||Punjab & Sind Bank||India||11.8||41.4|
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 non-performing loan (NPL) ratio (above 10%) and loan loss reserves to gross NPLs ratio (below 100%) as key parameters that will impact financial strength. The “Bank Watch List” is a tool to monitor and review the parameters to give a holistic view of the financial strengths of the institutions under evaluation. This is the first iteration of what we think will be a powerful tool for the industry to benchmark financial strength and will be continuously enhanced.
Who are in the Bank Watch List?
Although there were slight improvements in the overall asset quality of Asia Pacific banking sector in the financial year 2018, asset quality remains a crucial issue in the region. While India, Indonesia and Pakistan saw their banks’ asset quality improved, banks in Bangladesh, Brunei, the Philippines and Sri Lanka recorded higher average gross non-performing loan (NPL) ratios.
This year’s Bank Watch List includes fifteen Indian banks, four Bangladeshi banks and one each from Japan and Pakistan. Among all the 20 countries and territories, the asset quality of banks in Bangladesh and India remained the weakest. The lower formation of new bad loans,higher recoveries and resolutions from large stressed assets under the Insolvency and Bankruptcy Code (IBC) contributed to the improved asset quality of Indian banks. Nonetheless, the levels of non-performing assets were still higher than in the financial year ended 31 March 2017.