China dominates global bank rankings

John Kavanagh Financial institutions / Big five & fintech

Two of Australia’s big banks lost a little ground in global banking rankings over the past year, while China’s big four remain firmly entrenched at the top of the ladder.

S&P Global Market Intelligence has published its annual ranking of the world’s 100 largest banks, with Commonwealth Bank holding its position at number 43 and ANZ holding its position at number 45.

Westpac slipped from number 47 to 48 and NAB dropped from number 50 to 52.

The rankings are based on total assets, converted to US dollars.

The top four banks are Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China and Bank of China.

S&P says that despite the slowdown in China’s economic growth over the past year, the four banks increased their assets by an average of 1 per cent to a total of US$13.8 trillion. The annual increase would have been higher but the yuan lost more than 5 per cent against the US dollar during the survey period.

The number five bank is Japan’s Mitsubishi UFJ Financial Group. The first US bank to make an appearance is JPMorgan Chase & Co, at number six.

The rest of the top 10 are HSBC Holdings, Bank of America, BNP Paribas and Credit Agricole Group.

Several of the US banks improved their rankings but S&P says this was largely the result of a stronger US dollar.

Two new banks made the list: China Zheshang Bank, which came in at 99; and the merged US institution, BB&T Corp and SunTrust Banks, which came in at 62.

China has 19 banks in the top 100 and the United States 12.

The resilience of China’s banking goliaths at the top of a simple asset size ranking partly has origins in the pricing power that very large firms hold in almost any industry niche.

“Competition has declined around the world, measured as a moderate increase in average firm markups” during the period from 2000 to 2015, analysts from the International Monetary Fund argued in a working paper released over the weekend.

The markup increase “is driven by already high-markup firms” found in the top decile of the markup distribution, “and there is a [clear] relation between firm size and markups that is first decreasing and then increasing … the increase is mostly driven by increases within incumbents”.

Finance and insurance firms made of six per cent of the IMF sample, but 10 per cent by revenue.