RBI’s list of
‘superbanks’ has changed dramatically over the past six months. But
the concentration of consumer banking into fewer and fewer players
may not address underlying problems in the market, and still leaves
many challenges for governments and regulators. Hugh Fasken and
John Hill report.

Back in May when RBI first published its table of
‘superbanks’ (see RBI 592), the world’s banking industry
was a very different market. Six months later and things are very
different (see table below) – some of the biggest brands
have disappeared in the chaos of desperate mergers and
acquisitions, nationalisations and shocking banking failures. A
much bigger, expanded version of this table, analysing the top 50
retail banking groups, will appear on the new www.retailbankerinternational.com
website launching at the end of November.
 

By all accounts, 2008 will be seen as one
of the most turbulent years in the history of banking – though 2009
is looking similarly downbeat as the crisis starts to migrate to
the Asia-Pacific region and other emerging markets (see
Industry turmoil extends to Asia).

Third- and fourth-quarter 2008 figures,
and indications on 2009, from US, European and Asian financial
institutions reveal an industry fast readjusting to a high-risk,
low-profit environment.

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HSBC, for instance, viewed as a bellwether
for the global banking market, stated in its third-quarter figures
that loan impairments in Hong Kong and China, and slower economic
growth in Latin America and the rest of Asia-Pacific, led to a
greater impairment of consumer credit balances (see News
Digest).

The upshot across the world will be more
M&A activity as banks look to cut costs and benefit from
greater scale – though if one conclusion can be drawn from the
current crisis it is that size has not been a saving factor.
Wachovia, Royal Bank of Scotland, Washington Mutual, Fortis: all
very big banks with billions of dollars in assets and all, now,
either gone, nationalised or fractions of their original
selves.

What has helped is diversification
geographically and in terms of business segments, as well as a
solid funding base (HSBC being a strong case in point). What killed
HBOS in the UK and led to its rapid, controversial take-over by
Lloyds TSB, for instance, was its over-reliance on wholesale
funding (despite being the UK’s largest retail savings bank) and an
almost 100 percent focus on the UK (in particular, the
fast-dwindling UK housing market).

The creation of national
champions

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Nevertheless, the second half of 2008 has
seen the creation of more ‘national champions’: in the US, the
Wells Fargo/Wachovia deal (see RBI 600); in Germany, the
Commerzbank/Dresdner deal (see RBI 598); in the UK, the
Lloyds TSB/HBOS merger (see RBI 599); and, in France, the
merger of Caisse d’Epargne/Banque Populaire (see RBI
600).

More will surely follow: banks in Spain
are most likely to consolidate, as might ones in markets such as
Ireland, India, The Baltics and Russia as well as further deals in
the US.

For regulators, the domination of a
country’s banking market by fewer and fewer, and bigger and bigger,
banks will continue to cause problems (as will the need to, at some
point, decrease the excessive deposit guarantee levels rifled into
the markets to improve stability).

Banks will not be allowed to fail, for
instance, and will require much tougher regulation to ensure they
remain stable and viable – huge challenges for governments over the
coming years.

The goal will be to get away from the
sense that banking markets across the globe have now effectively
been quasi-nationalised with unlimited government support.

RBI’s new website will be launching
soon – please visit us online to see the substantially expanded
service.

 

TRENDS
Superbanks-the world’s largest retail banking groups ranked by
retail deposits
. Nos of retail
banking markets		 Main
retail
banking market(s)

Worldwide

 Group cost-income ratio,
H108   
Branches ATMs No. of retail customers(m) Group profit after tax, H108 ($bn) Group profit after tax, FY07 ($bn) Total group assets,
FY07 ($bn)		 Total retail loans and advances, FY07
($bn)		 Total retail deposits,
FY07 ($bn)		 Retail profit before tax, Profit
per retail customer, FY07 ($)		 Retail profit before tax, H108 ($bn) Profit
per
retail customer, H108 ($)
HSBC 83 UK, US, Global 10,100 17,027 110 7.72 19.13 2,354 498 1,162 5.90 46 2.31 18 51
Royal Bank of Scotland (1) 14 UK, US 4,500 13,000 n/a -1.34 13.34 3,700 434 1,133 n/a n/a 4.84 322 48.2
Credit Agricole (2) 20 France, Italy 11,095 10,400 31 1.72 8.69 2,183 592 898 8.56 276 2 64.5 60
ING 17 Netherlands, US, Germany, Global 3,668 6,000 27.8 4.64 12.74 2,035 853 772 3.59 129 1.72 61.9 65.2
Mizuho (3) 1 Japan 513 1,500 n/a n/a 3.05 1,541 320 693 7.72 n/a n/a n/a n/a
  BNP Paribas+ Fortis . . 7,500 10,200 23 . . 4,021 785 654 . . . . .
  Wells Fargo+ Wachovia . . 9,241 12,237 27 E . . 1,384 554 641 . . . . .
Deutsche Bank 5 Germany 1,992 6,000 E 13.8 0.73 8.72 2,867 311 608 1.65 120 0.91 65.9 93.6
Barclays 27 UK, South Africa, Global 3,918 13,111 25 n/a 7.64 2,386 309 562 7.10 284 2.03 81.2 56
Mitsubishi UFJ Financial (4) 2 Japan 1,205 2,508 40 . 6.23 1,799 571 560 11.96 299 n/a n/a 66.9
Industrial and Commercial
Bank of China		 1 China 16,582 23,420 170 9.48 12.09 1,100 117 524 12.58 74 4.7 27.6 28.46
BNP Paribas 38 France, Italy, US 5,700 7,700 17 5.38 10.48 2,618 679 515 2.52 148 2.36 138.8 62.7
 Commerzbank + Dresdner . . 1,894 n/a 15.3 . . 1,514 429 472 . . . . .
  Caisse d’Epargne + Banque Populaire . . 7,238 10,780 32.5 . . 1,091 551 446 . . . . .
  Lloyds TSB + HBOS . . 3,100 n/a 39 . . 1,820 661 429 . . . . .
Santander 29 Spain, UK, Brazi 13,178 26,267 65 6.34 12.14 1,408 706 411 13.45 207 6.99 107.5 40.4
Societe Generale (5) 38 France, CEE 5,792 8,282 27 2.84 1.27 1,655 464 399 5.02 186 2.47 91 69.8
Wachovia 1 US 3,300 5,277 15 E -9.56 6.31 809 271 391 8.59 572 1.14 76 75
China Construction Bank 1 China 13,447 26,135 156 E 8.57 8.21 984 113 381 3.82 24 1.7 10.9 34.03
  JPMorgan Chase + WaMu . . 9,335 13,813 35 E . . 1,965 498 373 . . . . .
Bank of China 1 China 10,702 19,000 130 E 6.52 9.12 907 114 364 3.01 23 1.94 14.9 37.8
BBVA 12 Spain, Mexico, US 7,971 17,136 47 4.48 8.21 776 426 343 n/a n/a n/a n/a 36.2
Bank of America (6) 1 US 6,143 18,500 59 4.62 14.98 1,936 427 339 14.69 249 2.97 50.3 49.5
AVERAGE . . . . . . . . . . 5.32 202 2.09 98.80 .
TOTAL . . . . . . . . . . . . . . .

E=estimate. Data does not include postal
banks, apart from ING. Retail banking figures are either as given
by the banks themselves or calculations made by RBI from available
data. Only meaningful data given for recently merged groups.

Notes: (1) Includes some commercial
banking; (2) Retail profit 2007 includes LCL; (3) Only Q108
reported so far; (4) Only Q108 reported so far; (5) Includes French
networks and international retail banking; (6) Does not include
Merrill Lynch; Source: RBI