In a recent publication, Bloomberg Markets announced the world’s top 20 strongest banks based on their analysis. The five categories on the basis of which banks were evaluated for this analysis were:
1. The ratio of a bank’s tier 1 capital to its risk-weighted assets accounted for 40% of each bank’s overall score.
2. The ratio of nonperforming assets to total assets got a weighting of 20%.
3. The ratio of reserves for loan losses to nonperforming assets also accounted for 20%.
4. The ratio of deposits to funding accounted for 15% of the score.
5. And the efficiency ratio, which compares costs with revenues, received a 5% weighting.
When it comes to the US, the three strongest banks as per Bloomberg Markets’ analysis were: Capital One Financial in McLean, Virginia at no. 6; Citigroup at no. 14; and Winston-Salem, North Carolina-based BB&T (the ninth-largest US commercial bank by assets) at no. 15. Although, US banks were generally behind some of their Asian peers on the list.
New York-based Citigroup, the world’s 12th-largest bank in terms of assets in the ranking period, is the only large global lender among the 20 strongest. The biggest US banks by assets—led by JPMorgan Chase and Bank of America—were not there in the list.
Capital One’s strength comes from US consumers and their prolific credit card spending and abundant auto loans. In the loan-loss-reserves-to-nonperforming-assets category, Capital One tops the list, thanks to its consumer push. It’s benefiting from low credit card delinquencies as US banks’ quarterly write-offs on the cards slid to less than 3% last year, the US Federal Reserve said.
In 2012, Capital One was ordered by the Consumer Financial Protection Bureau to pay $210 million to settle charges of deceptive marketing of credit card products such as identity theft monitoring. The bank didn’t admit any wrongdoing. Capital One’s subprime auto financing business is getting investigated by the US Justice Department and others.
Canada has two entries in the top 20 banks: Desjardins at no. 5 and Canadian Imperial Bank of Commerce at no. 18. CIBC is the only North American bank to appear in the ranking all five years.
Source: The World's Top 20 Strongest Banks by Bloomberg Markets
To identify the world’s strongest banks, Bloomberg used the Equity Screening (EQS) function on the Bloomberg Professional service to obtain a list of public and private banks with total assets of $100 billion or more as of June 1.
According to the evaluation on the above-mentioned categories, banks were ranked on each criterion, and the ranking positions were weighted and combined to determine overall scores. Lenders that reported a loss in net income were excluded. All data is based on the banks’ latest fiscal year, which in most cases ended on December 31, 2014. (Norinchukin Bank and a few Indian banks have a March-ending fiscal year; their ranking was based on data for the year ended on March 31, 2014.) The only banks that provided Bloomberg with data in all five categories were considered. In total, 114 banks were ranked with 13 of them being private banks.