Sunday, 26 May 2024

ICBC still largest bank in the world as assets grew 10.7%

5 min read

By Wendy Weng

The top ten remained largely unchanged in the ranking of the largest banks in Asia Pacific, while HSBC slipped two places to rank 13th due to the stronger growth of Chinese banks and the appreciation of the RMB against the US dollar.

  • With total assets of $5.1 trillion at the end of 2020, Industrial and Commercial Bank of China has retained its position as the largest bank in the world
  • Only Indonesia and the Philippines experienced a drop in bank loans
  • Seventeen out of the 22 markets saw aggregate net profit of banks decline

The aggregate total assets of the 500 largest banks in Asia Pacific expanded by 14.2% in 2020, according to The Asian Banker 500 (AB500) 2021, an evaluation of the 500 largest commercial banks and financial holding companies (banks) in the region for the financial year 2020, with a March 2021 cutoff.

The top ten ranking for this year remained largely unchanged, with China's big four banks retaining the top four spots. Industrial and Commercial Bank of China remained the largest bank, with its total assets up by 10.7% to $5.1 trillion in 2020. Mizuho Financial Group and Japan Post Bank switched places, with Mizuho climbing one place to seventh. There are 27 banks in the region with total assets greater than $500 billion, which comprise 14 Chinese banks, five Japanese banks, four Australian banks, two South Korean banks and one each from Hong Kong and India.

The largest banks in Japan, Hong Kong, Australia, India, South Korea and Singapore held the fifth, 13th, 18th, 22nd, 25th and 28th places in the ranking respectively. In addition, the largest bank in Indonesia, Malaysia, New Zealand, Taiwan and Thailand also ranked among the top 100 largest banks in the region. In contrast, the largest bank in Bangladesh, Brunei, Cambodia, Kazakhstan, Myanmar, Pakistan and Sri Lanka ranked outside the top 300 largest banks.

This year’s evaluation covers 22 countries, territories and special administrative regions. The 500 largest banks combined had $71.8 trillion in total assets, $37.4 trillion in net loans, $49.7 trillion in customer deposits and $425 billion in net profit. Banks in China accounted for 53.1% of the aggregate total assets of the 500 largest banks, followed by Japan (20.5%), Australia (4.4%), South Korea (4.3%), Hong Kong (4.1%) and India (3.7%). Meanwhile, Chinese banks generated 66% of the aggregate net profit, compared with 6.9% for Japanese banks, 5.1% for Hong Kong banks and 3.8% for Indian banks.

HSBC fell two places compared with last year 

Chinese banks maintained a double-digit growth, with a 10.6% increase in aggregate total assets of the 183 banks on the list, rising to $38.2 trillion in 2020, and saw a 12.9% rise in aggregate net loans, increasing to $20.6 trillion. Bangladesh, India, Kazakhstan, Macau, Pakistan, South Korea and Sri Lanka posted stronger asset growth than China, while total bank assets in Australia, Hong Kong, Malaysia and Singapore grew slower at 3%, 8.7%, 4% and 8.1% respectively.

Despite its total assets growing by 8.7%,Hongkong and Shanghai Banking Corporation (HSBC) slipped from the 11th place last year to 13th place this year, as it was surpassed by two Chinese banks, China Merchants Bank and Shanghai Pudong Development Bank. In addition to the stronger asset growth of Chinese banks, this is also attributable to the appreciation of the renminbi against the US dollar. China Merchants Bank improved one place in the ranking, coming in at 11th, with its total asset up by 12.7% to $1.28 trillion in 2020. Shanghai Pudong Development Bank gained two spots to 12th place, as its total assets expanded by 13.5% to $1.22 trillion in 2020.

We project that the ranking of HSBC will fall further in the future, as Industrial Bank, China CITIC Bank and China Minsheng Banking Corporation each have more than $1 trillion in total assets. In 2020, Industrial Bank and China CITIC Bank grew their total assets by 10.5% and 11.3% respectively. Total assets of Industrial Bank, which ranked 14th, was only 0.4% less than that of HSBC at the end of 2020.

Bank loans in Indonesia and the Philippines contracted

In 2020, the 500 largest banks grew aggregate net loans and customer deposits by 13.4% and 14.4% respectively. Banks in Bangladesh, China, India, Kazakhstan, South Korea, Sri Lanka and Vietnam registered a double-digit loan growth. On the contrary, Indonesia and the Philippines witnessed a contraction in aggregate bank loans. The loan demand weakened amid the pandemic, and banks were more cautious in extending credit despite sufficient liquidity.

The aggregate net loans of Indonesian banks on the AB500 contracted by 3.8%, although the government has launched the credit guarantee scheme to stimulate lending for micro, small and medium enterprises. Bank Mandiri and Bank Central Asia saw their net loans shrink by 5.3% and 4.7% respectively. Bank Rakyat Indonesia and Bank Negara Indonesia only posted a 0.8% and 0.4% rise in their net loans respectively. The Philippines recorded a 4.2% decline in the aggregate net loans of banks. Only BDO Unibank and Rizal Commercial Banking Corporation reported an increase in net loans.

Nevertheless, aggregate customer deposits of banks in Indonesia and the Philippines went up by 13.2% and 4.7% respectively. Therefore, average loan to deposit ratio (LDR) was down from 94.6% to 80% in Indonesia and from 86.5% to 79% in the Philippines. In addition to these two countries, banks in Australia, India, Pakistan, New Zealand also recorded lower LDR, as customer deposits grew stronger than net loans.

Aggregate net profit shrank by 5%

The aggregate net profit generated by the 500 banks fell by 5% in 2020. Seventeen out of the 22 markets witnessed a decline in aggregate net profit of banks, mainly triggered by the massive loan loss provisions banks set aside and the cuts in interest rates. Malaysia and Indonesia saw aggregate net profit of banks drop the most, at 42.7% and 35.1% respectively. In addition, aggregate net profit of banks in Australia, the Philippines, Singapore and Thailand also slumped by around 30%. Westpac Banking Corporation, CIMB Group, Standard Chartered Bank (Singapore), Bank Negara Indonesia and Philippine National Bank are among the banks that saw their net profit plummet by more than 60%.

Out of the 500 banks, 203 registered an increase in net profit in 2020, 273 posted a decline and 12 moved from loss to profit. Another 12 banks reported net losses, which comprise four from Japan, three each from China and India and two from Malaysia. In the AB500 2018 ranking, 16 Indian banks were unprofitable. After bank consolidation, the overall financial performance of the Indian banking sector showed some improvement in the financial year ended 31 March 2021. Central Bank of India’s net loss was down from $177 million to $134 million, while Punjab & Sind Bank’s net loss widened from $140 million to $368 million. Yes Bank still posted a net loss of $470 million, contracting from a net loss of $2.3 billion in the previous year. 

AMMB Holdings in Malaysia had the biggest loss of $890 million, driven by one-off exceptional items and higher impairment charges. It posted an 8% increase in operating income and its operating profit was also up by 11%. Standard Chartered Bank Malaysia booked a net loss of $15 million, while its allowance for expected credit loss grew by 8.7 times. The Chinese digital bank CITIC aiBank turned profitable in 2019, but it reported a net loss of $56 million in 2020. In the first half of 2021, the bank posted a net profit of $16 million.

Overall, most banks in Asia Pacific have managed to maintain their operational resilience during the COVID-19 pandemic. The Asia Pacific banking sector is gradually recovering from the effects of the pandemic, although the recovery is uneven. There remains a high degree of uncertainty and banks’ performance will continue to be constrained.

Click here to see the 2021 Largest Banks in Asia Pacific Rankings

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