In a global economy that has been plagued by troubles in the world’s financial systems, the words “safe” and “bank” still give investors pause. The shakeup of banking systems around the world raises the question: "Which banks are the safest?"
For the past 20 years, Global Finance has compiled a list of the World’s 50 Safest Banks, and in the current environment of increased regulation and oversight, long-term safety of banks is of key interest. According to Global Finance, the companies who ranked highly this year were the ones that "cleaned up their balance sheets and strengthened their capital positions."
This ranking of safe banks was created through the comparison of long-term credit ratings (from Moody’s, Standard & Poor’s, and Fitch) and analysis of total assets owned by the 500 largest banks in the world.
For ease of comparison, we’ve listed the highest-ranking bank in each country, since many of the highly ranked banks are headquartered in the same country.
It may be a surprise where you’ll find the safest banks in the world. Click ahead to for the list!
By Paul Toscano and Jennifer Parker
Posted 19 Aug 2011
Safest Bank: National Bank of Kuwait (No. 47)
Under the supervision of Kuwait’s central bank there are five commercial banks, six Islamic banks* and one specialized bank, along with nine international branch banks incorporated within the country, as of July 2010.
According to the central bank, The National Bank of Kuwait operates 75 branches within the country and 14 branch offices abroad. The Bank holds an A+ rating from S&P, an AA- rating from Fitch, and an Aa3 rating from Moody’s.
According to the company’s full-year 2010 statements, the bank recorded $1.07 billion in profits and listed approximately $46 billion in assets, which comprises more than one-third of the Kuwaiti financial system.
*Islamic banks specifically cater their business to adhere to Islamic laws.
Safest Bank: National Bank of Abu Dhabi (No. 46)
The second-largest bank in the United Arab Emirates, the National Bank of Abu Dhabi is also the safest, according to Global Finance. With total assets of $67 billion and a market capitalization of $8.6 billion as of June 2011, the bank is also over 70 percent owned by the government, with foreign ownership limited to 25 percent of equity. The bank is listed on the Abu Dhabi Securities Exchange and is currently rated Aa3 by Moody’s, A+ by S&P, and AA- by Fitch.
Safest Bank: Shizuoka Bank (No. 43)
For the second year in a row, Shizuoka Bank comes in as Japan’s safest bank, rising to No. 43 on the overall list from No. 50 in 2010. In 2010, Shizuoka reported net income of $463 million on $2.34 billion in revenues, and had $8.4 billion in Tier 1 capital vs. $661 million in Tier 2 capital.
The bank operates 167 branches and 23 sub-branches, catering to domestic customers in Tokyo, Osaka, Nagoya, and Shizuoka, in addition to overseas customers in New York, Los Angeles, Brussels, Hong Kong, Shanghai, and Singapore.
According to the company, the bank's capital adequacy ratio is 15.32 percent on a consolidated basis, and is one of the highest ratios among Japanese banks. Shizuoka has a market cap of approximately $6.55 billion.
Safest Bank: China Development Bank (No. 38)
For the first time in the history of the Global Finance list, a Chinese institution finds itself in the top ranks. The China Development Bank is under direct control from the state council. The bank’s governor, Chen Yuan, is a secretary in the Beijing Municipal Committee. Debts issued by the CDB are guaranteed by China’s central government and the bank has been involved in the financing of large infrastructure projects, including the Three Gorges Dam, the Beijing-Shanghai high-speed railway, and the decades-long South-to-North water-diversion project, among others.
According to the bank’s 2010 financial report, total assets stand at approximately $800 billion (5,112 billion renminbi) and approximately $705 billion in loans outstanding. Of these outstanding loan balances, 39.31 percent are in Eastern China, 20.50 percent in Central China and 23.99 percent in Western China. The bank also maintains a rating of Aa3 from Moody’s, AA- from S&P, and A+ from Fitch.
Safest Bank: Cassa Depositi e Prestiti (No. 31)
The safest bank in Italy is Cass Depositi e Prestiti, with approximately $356 billion in assets in 2010. According to the company, the main source of funding is from the issuance of postal savings bonds, which are guaranteed by the Italian government and placed through the Italian postal service. The bonds are considered by many investors to be safe-haven investments. The bank also finances public investments, including roads, public buildings, and large public projects.
Cassa Depositi e Prestiti is a founding member of the Long-Term Investors Club, along with several other European institutions, “to affirm the key role that long-term investing plays in ensuring financial stability and spurring economic growth.”
Safest Bank: Pohjola Bank (No. 28)
Finland’s Pohjola Bank, ranked 28th overall, is the country’s only bank to make the list. Traded on the Helsinki Stock Exchange, the institution has a market cap of $2.4 billion as of August 2011.
The bank operates more than 580 branches in Finland and offers banking services through 229 independent member co-operative banks as the central bank in the OP-Pohjola group.
The OP-Pohjola group listed earnings before tax at 575 million euros (US$828.5 million) in 2010, and has approximately 3.7 million private customers and 420,000 corporate customers.
Safest Bank: Bank of New York Mellon (No. 24)
In the Global Finance rankings of the world’s safest banks, the U.S. banking industry has six names making it to the Top 50, with Bank of New York Mellon ranking the best in the country at No. 24 overall. JPMorgan Chase (No. 34), Wells Fargo (No. 36), US Bancorp (No. 40), Northern Trust (No. 44), and CoBank ACB are the other U.S. banks making this year’s list.
BNY Mellon is the seventh largest bank in the country by assets, according to the Federal Reserve, with $200.24 billion in total assets in second-quarter 2011. See the bank’s full financials here.
Safest Bank: Nordea Bank (No. 22)
The four largest banks in Sweden—Nordea, Swedbank, Svenska Handelsbanken, and SEB—account for approximately 75 percent of the country’s market share, according to the Swedish Bankers Association. Two Swedish banks make Global Finance’s list this year, Nordea Bank at No. 22 overall and Svenska Handelsbanken at No. 23.
According to the company, Nordea Bank has about 11 million customers and operates 1,400 branches, as well as call centers and an e-bank. The bank’s two largest stakeholders are the Sampo Group, a Finnish banking group that holds 21.3 percent of the company, and the Swedish government, which owns a 13.5 percent stake. The company reports assets of $840 billion with a Tier 1 captial ratio of 10.7 percent.
Safest Bank: DBS Bank (No. 19)
In Singapore, the safest bank in 2011 is DBS Bank, which operates a regional network of more than 200 branches across 50 cities throughout Asia. With primary operations in Singapore and Hong Kong, the company reports that nearly 85 percent of its annual net profit comes from those markets, reporting 4 million customers in Singapore and 1 million in Hong Kong.
DBS holds a credit rating of Aa1 from Moody’s and, according to the company, it is the largest commercial banking group in Southeast Asia. DBS is listed on the Singapore Exchange. For the past two years, DBS has topped Global Finance’s list for the safest banks in Asia.
Safest Bank: HSBC Holdings (No. 16)
One of the largest banking systems in the world, the U.K. only manages to get three banks on the Top 50 list. HSBC, with 1,347 U.K. offices and a market cap of $149.6 billion, is the country’s largest and safest bank.
The bank is listed on the New York Stock Exchange, and is rated Aa2 by Moody’s and AA by Fitch. As of the second quarter, their latest Core Tier 1 ratio is 12.2 percent. This ratio—also known as “core capital”—measures a bank's core equity capital compared with its total risk-weighted assets. It measures a bank's financial strength.
National Australia Bank Limited (No. 12)
Commonwealth Bank of Australia (No. 12)
Commonwealth Bank of Australia (CBA) is one of Australia’s four major banking groups, and is the largest bank by domestic assets ($638 billion as of December 2010).
With a market cap of $77.4 billion, CBA is in an unseemly tie with smaller rival National Australia Bank (NAB), with its market cap of $50.5 billion.
According to Fitch’s review of the company, CBA’s liquidity and capital positions have been strengthened in recent years—it’s Core Tier 1 ratio now 7.35 percent. NAB’s Tier 1 capital ratio, by comparison, is 11 percent.
Safest Bank: Royal Bank of Canada (No. 11)
In Global Finance’s 2011 report, Canada is home to the Top 4 safest banks in North America, led by the Royal Bank of Canada (RBC).
With more than 18 million customers, RBC operates in 56 countries and is the country’s largest financial institution, with a market cap of $72.8 billion. Core Tier 1 capital for the bank is relatively high at 13.6 percent as of end of May 2011.
Safest Bank: Banco Santander (No. 10)
Despite the European debt crisis, three of the Spain’s banks made this year’s list. Banco Santander is ranked No. 10 worldwide, up from No. 14 last year, and now commands a market cap of $75.5 billion.
Banco Santander is the major bank of Group Santander, which operates in Europe, Asia, North America, Latin America, and Africa. Group Santander is one of the largest banking groups in Europe, with more than 1.2 trillion euro (US$1.7 trillion) in assets in the first quarter of 2011.
Safest Bank: Banque et Caisse d’Épargne de l’État (No. 8)
Banque et Caisse d’Épargne de l’État is the only Luxembourg bank to make Global Finance’s list. The institution is owned by the government of Luxembourg and provides all the functions of a commercial bank, including retail and private banking.
The bank reported approximately 38.01 billion euros (US$54.5 billion) in assets in 2010, with a net income of 185 million euros (US$264.9 million) and capital adequacy ratio of 21.6 percent.
Safest Bank: Zurcher Kantonalbank (No. 4)
The Swiss banking system is represented in Global Finance's rankings by three banks, led by Zuercher Kantonalbank, with international players Credit Suisse and Pictet & Cie appearing lower in the list.
Zuercher Kantonalbank has assets of $126 billion Swiss francs (US$159 billion) and holds triple-A ratings from Moody’s, S&P, and Fitch. The bank places fourth overall on this year’s list.
Safest Bank: Bank Nederlandse Gemeenten (No. 3)
The Bank Nederlandse Gemeenten (BNG) is one of the three Dutch banks among the Top 10 safest banks in the world. A government-owned bank—50 percent by the Dutch government and 50 percent by municipalities—BNG is joined by Rabobank and Nederlandse Waterschapsbank at the top of Global Finance’s list.
According to BNG, total assets are 118.5 billion euros (US$170.8 billion). BNG-issued long-term debt securities are rated triple-A by Standard & Poor's, Moody's and Fitch.
Safest Bank: Caisse des Depots et Consignations (No. 2)
France is home to the world’s second safest bank, Caisse des Dépôts et Consignations (CDC), according to Global Finance. France also has a strong showing, with six banks in the Top 50 safest banks for the second year in a row.
The Caisse des Dépôts group is a public financial institution that performs public-interest missions on behalf of France’s central, regional, and local governments.
Although the bank has always had autonomy, CDC remains "under Parliament's supervision and guarantee," according to French law. The bank’s connection to the French government also helps it maintain its triple-A credit ratings.
The CDC group is a public/private mix of companies and has been successful in growing profits, despite the global financial crisis, posting a 35 percent gain in recurring profits between 2007 and 2009.
Safest Bank: KfW (No. 1)
Four of the six German banks that made Global Finance’s list appear in the Top 10, with KfW at the top of the pack. Landwirtschaftliche Rentenbank, which was last year’s safest bank in Germany, still ranks highly at No. 5.
KfW is owned by the Federal Republic of Germany and the federal states. As such, it has a public-sector mandate. The government guarantees all bank obligations, including loans extended, debt securities issued, fixed forward transactions or options, and other third-party lending activities.
The bank’s overall volume of commitments is 40.6 billion euros (US$58.4 billion) as of August 2011, with domestic financing volume at 30.3 billion euros (US$43.6 billion). The bank has a solid Core Tier 1 capital ratio of 14.8 percent.
The bank holds a triple-A rating from Moody’s, S&P, and Fitch.