WEDNESDAY, 25 AUGUST 2010 BY LOUIS AZODE 

 

Once again, The Banker, Financial Times of London has released the Top 1000 World Banks for this year. As usual, the global rankings are remarkably characterised with tremendous surprises and leapfrogging, with the aggregate Tier 1 capital growing by 15 per cent to $4,915 billion from 2009 ranking.Profitability showed a marked rebound from $115 billion in 2008 to $400 billion in 2009. Return on capital only increased marginally or tangentially to 8.2 per cent from the paltry 2.69 per cent recorded in 2009 ranking.

 

Of note, banks in the United States of America again, maintained their pre-dominance in the world of banking, over their global counterparts. Also, the highly incisive chats clearly show many western banks bouncing back from their huge loss making positions into increasing profitability. A lot still remains desired from other climes.To some banks and nations, the financial meltdown storm is over. While to some others the thick dark cloud is just about gathering.

 

Globally, total assets of Top 1000 World Banks slumped by a whooping $1,000 billion, from almost $96,395 billion to  $95,532 billion, an obvious impact of the global financial squeeze.Banks in the United States of America have continued to show their resilience in bouncing back to global reckoning and maintaining impressive lead after the devastating effects of global financial impasse that actually started with the U.S. sub-prime challenges.The global financial crisis ravaged and left many banks and nations badly wounded, if not comatose.

 

Early resolution of financial crisis, through astute and skilful management and bailouts has proved to be the key to solid economic recovery, stability, profitability and growth. This is a plus to President Barrack Obama of the United States of America.Last year, the first three biggest banks in the world were from the United States of America. Clearly, this year again is an all America affair. The U.S. banks in a row clinched the first three positions of the Top 1000 World Banks ranking with a combined Tier 1 capital of $420.39 billion. All the African banks in the ranking put together is under $40 billion, less than 10 per cent of only three U.S. banks.More importantly, this no doubt is an indication of where the world’s huge capital resource domiciles.

 

Occupying the first position in the world of banking this year with a Tier 1 capital of $160.388 billion is Bank of America Corp (BOA), the new owner of Merry Lynch. The bank took the second position with Tier 1 capital of $120.814 billion in 2009 but this year has bullishly overtaken and shoved JP Morgan Chase & Co aside to the second position.JP Morgan Chase & Co only $132.971billion down from $136.104 billion recorded in 2009.Tier 1 capital is a globally accepted yardstick to measure the financial strength of banks. The true financial strength of a bank is determined by the size of bank’s real Tier 1 capital.

 

Following Bank of America, JP Morgan Chase and Citigroup are two United Kingdom banks; namely, Royal Bank of Scotland and HSBC Holding respectively. These are closely trailed by another U.S. bank, Wellsfargo & Co.  China’s ICBC came 7th, while BNP Paribas, Banco Satander and Barclays took the 8th, 9th and 10th positions respectively in the Top 1000 World Banks.In Africa, South African banks maintained their age-old continental dominance by occupying the first four top positions in the continent. Standard Bank led the pack with $9.562 billion in Tier 1 capital, followed by FirstRand with $5.285 billion. The fifth slot went to Morocco.

 

The banking reforms in Nigeria took its toll on Nigerian banks. All the Nigerian banks put together are no match to Tier 1 capital of Standard Bank of South Africa unlike before the banking reforms. Nigerian-based Stanbic-IBTC adds up to Standard Bank of South Africa.FirstBank of Nigeria Plc is occupying the sixth position in Africa. The foremost Nigerian bank lost the fifth position it occupied last year to a Moroccan bank, Attjariwafabank that was unranked in 2009, to assume the six positions in Africa.Interestingly, last year, thirteen Nigerian banks made the Top 1000 World Banks’ ranking. The number shrank to nine this year with huge declining values.

 

This is attributed to the forceful removal of top CEOs of some Nigerian banks and dramatic erosion of two- third capital in the Nigeria banking sub-sector, following the Central Bank of Nigeria’s Governor, Mallam Sanusi Lamido Sanusi’s banking sector reforms that took the entire world by storm.The following Nigerian banks made 2010, Top 1000 World Banks ranking: FirstBank of Nigeria Plc, Zenith Bank Plc, GTBank Plc, Access Bank Plc, UBA Plc, Fidelity Bank Plc, FCMB, Skye and Diamond Bank Plc.FirstBank of Nigeria Plc again, occupies the first position among Nigerian banks with a Tier 1 capital of $2.277 billion, down from $2.993 billion in 2009. FirstBank ranked sixth in Africa and 285th in the world, down from 215th position in the world ranking in 2009.

 

Zenith Bank Plc is the second in Nigeria, 7th in Africa and 287th in the world. Its Tier 1 capital also plummeted from $2.935 billion in 2009 to $2.270 billion in 2010.Other Nigerian banks that made the ranking last year are not in this year’s league. This includes Union Bank of Nigeria Plc, Oceanic, Intercontinental and Afribank. Monumental capital erosion was the cause.The Banker uses audited annual reports and accounts that are approved by the Central Bank of each country in ranking the Top 1000 world banks.

 

The Banker had predicted last year July 2009 that although Nigerian banks looked good but storm clouds were gathering, as next year’s result might not look so rosy.This was in July 2009 edition, before Sanusi’s sledgehammer fell on some eight Nigerian banks found wanting with lax governance and international best practices in August 2009.The Banker predicated the forecast on the plummeting commodity prices (crude oil) and the dearth of foreign external financing among others.

 

However, some Nigerian banks that scaled the hurdle this year had made impressive showing in the areas of soundness of capital to asset ratio and best profit on assets.It may interest to note that Access Bank Plc was the only Nigerian bank out of twenty-five in the world ranked with the best profit on assets.Again, Access Bank Plc was the first Nigerian bank among the first twenty-five sound capital- asset ratios in the world. The other two Nigeria banks in this category are Fidelity and FCMB.

 

First City Monument Bank (FCMB) made its debut to the Top 1000 World Banks and had already overtaken some already existing Nigerian banks in Tier 1 capital.Significantly, most of the leading Tier 1 capital banks of the world are among the Top 15 most Equity Raising Banks in 2009. The U.S., Europe and Chinese banks are making giant strides in this area.

 

More revealing facts are in The 1000 World Banks of The Banker, Financial Times of London. Enjoy it.

• Azode is the Country Representative of the FT Group in Nigeria, publishers of The Banker.

 

Source:Guardian