Financial Assessment of Global Banking Industry

  • January 2013
  • -
  • Frost & Sullivan
  • -
  • 66 pages

This financial assessment study analyses the financial ratios of public companies across the globe in the banking industry. To assess the financial performance, ratios are divided into six categories: profitability management, cost management, liquidity management, credit risk management, capital management and interest rate risk management. Weights are assigned to different ratios based on the industry, and an overall rank is determined. Top performers by each category are highlighted.

Executive Summary
Profitability Management
•The most efficient company/sector/region in profitability management is the one that generates highest profits margins. Regional and Commercial banks in the Middle East and Africa are the most profitable banks in the industry. Global Average Return on Equity stood at X percent for Regional Banks and X percent for Commercial Banks in comparison to X percent and X percent in the Middle East and Africa respectively.
Cost Management
•Efficient cost management would increase profitability. The lower the productivity ratio (cost to income ratio), the better. Regional Banks in the Middle East and Africa are the best performers in terms of cost management with a productivity ratio of Xpercent in comparison to a global average of X percent. Commercial Banks in Latin America and the Caribbean are the best performers in the sector with a productivity ratio of X percent more than X basis points below the global average of X percent.
Capital Management
•Regional Banks in North America stood out in terms of capital management with a debt to equity ratio of Xx against an global average of Xx. Similarly, commercial banks in Europe are the top performers in terms of capital management in the sector.
Credit Risk Management
•Credit Risk management is an indicator of asset quality and solvency of a bank. Regional Banks in Asia-Pacific and Commercial Banks in Latin America and the Caribbean turned out be the best in terms of credit rate risk management. Non performing loans ratio for regional banks in Asia-Pacific was recorded at X percent compared to global sector average of X percent. The same was recorded at X percent for Latin America and the Caribbean compared to global sector average of X percent for commercial banks.
Interest Rate Risk Management
•Latin America and the Caribbean is the best region in terms of interest rate risk management for both regional banks and commercial banks. Net Interest Rate margin was recorded at X percent for regional banks and Xpercent for commercial banks as compared to global average of X percent and X percent respectively.
Liquidity Management
•Liquidity requirements are high in the banking industry due to the nature of the business. Efficient liquidity management requires a company to maintain liquidity close to the industry norms as more liquidity would mean inefficient use of resources and less liquidity would mean more risk for the company in the short run. Global average loans to deposit ratio for regional banks stood at X percent while compared to X percent for commercial banks.

Table Of Contents

TABLE OF CONTENTS

Executive Summary 3
Introduction 6
Financial Assessment of the Global Banking Industry 25
Geographic-Sector Analysis 36
Conclusions 56
The Frost and Sullivan Story 62

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