The World's Ten Strongest Banks

Posted by - Friday, May 4th, 2012

In Bloomberg Markets’ annual review of the top world banks, there was one country that was surprisingly dominant: Canada.

´╗┐Canadian banks took four of the top ten positions.

What's that all aboooot?

The ranking compared banks on a number of standards, including Tier 1 capital and risk-weighted assets, removing from the running banks that posted losses in 2011 and banks that failed stress tests.

CIBC (NYSE: CM) took third place behind a bank from Singapore and one from Sweden.  Closely behind in places four, five, and six were Toronto-Dominion Bank (NYSE: TD), National Bank of Canada (TSE: NA), and Royal Bank of Canada (NYSE: RY), respectively.

“Having conservative capital standards in Canada going into the downturn clearly was a competitive advantage,” TD Bank CEO Edmund Clark told Bloomberg.  

American banks were not so fortunate—none made the top ten, and only three appeared in the top 20, including JPMorgan Chase (NYSE: JPM), PNC Financial Group Services Inc. (NYSE: PNC), and BB&T Corp (NYSE: BBT).

Canadian banks attributed their success to the supervision they receive and the regulations they follow. Most banks are regulated by the Basel Committee on Banking Supervision, but the Canadian head, the Office of the Superintendent of Financial Institutions Canada, has stricter rules.

Basel I, the guidelines set by the Committee in 1988, required banks to have total capital at 8% of risk-weighted assets. This ensures stability if borrowers can’t or don’t pay back loans.

But the Canadian superintendent began requiring 10% in 1999. Julie Dickinson, the current superintendent, said:

“When the crisis erupted, we realized we had stuck to a fairly basic rule, which was that the bulk of Tier 1 capital had to be in equity. That turned out to be very, very important.”

Canadian banks have also had success on expanding into the U.S. Right now, many major U.S. banks are selling assets. Canadian banks are buying them.

Last year alone, banks in Canada paid $14.4 billion for acquisitions. This has been high in the past as well, and some banks, like TD Bank, have more branches in the U.S. than Canada. Profits for Canadian banks are slowing down this year, says RBC Capital Markets, but there is still growth. Profits are expected to be up 7% in 2012.

Here's the entire rundown:

1
OVERSEA-CHINESE BANKING (SINGAPORE)
2
BOC HONG KONG HOLDINGS (HONG KONG)
3
CANADIAN IMPERIAL BANK OF COMMERCE (CANADA)
4
TORONTO-DOMINION BANK (CANADA)
5
NATIONAL BANK OF CANADA (CANADA)
6
ROYAL BANK OF CANADA (CANADA)
7
UNITED OVERSEAS BANK (SINGAPORE)
8
DBS GROUP HOLDINGS (SINGAPORE)
9
HANG SENG BANK (HONG KONG)
10
SVENSKA HANDELSBANKEN (SWEDEN)
11
BANCO SANTANDER BRASIL (BRAZIL)
12
STANDARD CHARTERED (U.K.)
13
JPMORGAN CHASE (U.S.)

CHINA CONSTRUCTION BANK (CHINA)

BANCO BRADESCO (BRAZIL)
16
CREDIT SUISSE GROUP (SWITZERLAND)
17
PNC FINANCIAL SERVICES GROUP (U.S.)
18
BANK OF NOVA SCOTIA (CANADA)
19
SKANDINAVISKA ENSKILDA BANKEN (SWEDEN)
20
BB&T (U.S.)


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