International Bank Scoreboard
`SHIPWRECKS AND DISASTERS'
During a luncheon a few weeks ago for the chairmen of the world's 100 biggest banks, Swedish Finance Minister Anne Wibble broke up the crowd at Stockholm's Grand Hotel when she suggested how they could help her government bail out the country's ailing lenders. "If you want to buy a bank, or part of one," she said as the bankers tucked into their strawberry mousse, "don't hesitate to do so."
With most Swedish banks now on a heavy diet of government aid to help them through a severe economic slump and a real estate collapse, the chairmen didn't exactly rush to the podium to take advantage of Wibble's offer. Still, Sweden is hardly the only European government trying to unload big banks these days. Italy is planning to sell three mammoth state-controlled lenders that account for $900 billion in assets. France's new Conservative Prime Minister, Edouard Balladur, is also selling three, including loss-plagued Cr dit Lyonnais. Portugal and Norway hope to launch privatizations.
STILL STRUGGLING. But this is hardly the time to put banks on the block. As
BUSINESS WEEK's 1993 International Bank Scoreboard indicates, hard times are continuing to dog many of the world's top 50 lenders. Across much of the industrialized world, banks are still struggling with recession, rising losses, and diminishing capital. "We're seeing shipwrecks and disasters," says Robin Monro-Davies, managing director of the British credit-rating agency IBCA Ltd., which compiles the Scoreboard.
Not everything is bleak. Booming Asian economies and low British and U.S. interest rates are buoying hsbc Holdings. It owns Hongkong & Shanghai and Britain's Midland and America's Marine Midland banks. Indeed, once-beleaguered U.S. banks are making a stunning comeback on the heels of low interest rates, massive cost cuts, and a wave of mergers. But from there, things go downhill. Japanese and Continental European lenders, for example, "had awful figures for 1992," says Monro-Davies, "and 1993 is probably going to be worse." Indeed, few come close to the misery being experienced by Japanese banks. They remain the world's largest, with the top 10 accounting for some $4 trillion in assets. But the deflating Japanese asset bubble has left them with a massive bad-debt problem that may linger for much of the decade.
In the fiscal year ended Mar. 31, Japanese lenders posted double-digit profit drops after provisions for losses on $109.8 billion in nonperforming loans. But banks are also keeping thousands of troubled borrowers afloat by lending them large sums--at little or no interest. Including these cut-rate "structured loans," the industry's problem debts could exceed $275 billion. "We're still in a difficult period," concedes Bank of Tokyo Chairman Toyoo Gyohten.
The Japanese are trying to get through this rough stretch by disposing of assets overseas. During 1992, according to the Bank for International Settlements (BIS), Japanese banks reduced their overseas loans by 7%, to $879 billion. With as much as $100 billion in problem U.S. real estate loans, Japanese lenders have begun foreclosing on American properties. At home, meanwhile, regulators are helping out by keeping interest rates low and bailing out troubled small lenders.
"APPALLING" AMOUNT. While the Japanese struggle, European lenders are trying to shake off the effects of a deep recession. Germany's slump is producing an unpleasant crop of corporate and real estate loan losses. Finland is spending $7.5 billion to bail out its troubled banks--an "appalling" amount, says President Maunio Koivisto. And then there's Italy, where big corporate borrowers are hitting the skids. The most spectacular comedown has been that of the Ferruzzi family empire, which is unable to service $21 billion in bank borrowings.
If Italy is turning into bankers' hell, the U.S. has become a lenders' nirvana--and BUSINESS WEEK's index of "real profitability" shows just how good things have become. Country-to-country differences in capital standards and tax and inflation rates make some banks appear to be more profitable than they really are. So we adjust lenders' returns on equity to account for these factors. By this yardstick, America's NationsBank and BankAmerica are among the leaders.
Credit for the strong U.S. recovery goes in large part to the Federal Reserve, which has slashed the discount rate by 3.5 percentage points since 1990. That fact isn't lost on bankers in other countries who are still struggling against tight money. As the sluggish world economy prompts more countries to bring rates down, banks will start to revive. Whether they take full advantage of this to privatize, cut costs, and boost efficiency is another question. But the way things are going in global banking, they may have little choice.JAPAN LEADS IN SIZE...
DAI-ICHI KANGYO BANK $456.5
FUJI BANK 454.7
SUMITOMO BANK 448.9
SANWA BANK 445.9
SAKURA BANK 438.0
...AND MARKET VALUE...
MITSUBISHI BANK $73.6
SUMITOMO BANK 66.0
INDUSTRIAL BANK OF JAPAN 63.2
SANWA BANK 61.2
FUJI BANK 60.8
...BUT NOT PROFITS...
Real profitability index*
HSBC HOLDINGS Britain 1.226
NATIONSBANK U.S. 1.195
BANKAMERICA U.S. 1.182
CHEMICAL BANKING U.S. 1.142
BANK OF CHINA China 1.117
*Based on return on equity, adjusted for differing capital ratios,
inflation, and tax rates. Industry average=1.016.
Total capital ratio*/Percent
HSBC HOLDINGS Britain 12.30%
NATIONSBANK U.S. 11.52
SWISS BANK Switzerland 11.50
BANKAMERICA U.S. 11.49
CHEMICAL BANKING U.S. 11.29
*Ratio of capital to assets, adjusted for risk and off-balance-sheet items
DATA: IBCA LTD., MORGAN STANLEY CAPITAL INTERNATIONAL
William Glasgall in New York and Bill Javetski in Stockholm, with bureau reports