I was recently taking a look at the list of largest banks in the world (by total assets). And I was surprised to see that four out of the top five banks were Chinese. However, 15 years ago in the 2003 list of largest banks, not even a single Chinese bank made it into the top 20 largest banks! What seems more interesting is that all these four banks in China are owned and operated by the Government.
These four global banking behemoths of China are the Bank of China (2611 billion USD), China Construction Bank Corporation (2815 billion USD), Agricultural Bank of China (3016 billion USD), and the Industrial and Commercial Bank of China (3473 billion USD). Additionally, 12 Chinese banks figure in the top 50, and 18 in the top 100.
On the other hand in India, the largest bank – State Bank of India (420 billion USD), is a 100 billion USD short of securing a spot in the top 50 list! The next largest banks – which are both private sector banks – HDFC (130 billion USD) and ICICI Bank (120 billion USD), are a long shot from even SBI!
This gargantuan disparity between the sizes of banks in India and China got me thinking about why our banks were so small in comparison to those in China. I then thought if there was any observable correlation between the GDP of a country and the asset sizes of its banks in the top 50.
Let alone China – banks from European countries with sizes smaller than our states, populations a fraction of ours, and in some cases with economies (in terms of GDP) lower than ours, also outsize Indian banks by significant multiples. For example, the Deutsche Bank in Germany, UBS and Credit Suisse in Switzerland, Banco Santander in Spain, Barclays in the United Kingdom and UniCredit in Italy all figure well into the top 50 list unlike any Indian Bank.
Here is a table collating key data points for each of the top 50 banks for 2017. Source: S&P Global Market Intelligence, 2017 – The World’s Largest Banks:
|Rank||Bank Name||Asset Size ($B)||Country||GDP ($B)|
|1||Ind’l and Commercial Bank of China||3473||China||11,938|
|2||China Construction Bank Corp.||3016||China||11,938|
|3||Agricultural Bank of China||2816||China||11,938|
|4||Mitsubishi UFJ Financial Group||2626||Japan||4,884|
|5||Bank of China||2611||China||11,938|
|6||JPMorgan Chase & Co.||2500||USA||19,362|
|7||HSBC Holdings PLC||2374||UK||2,565|
|9||Bank of America||2188||USA||19,362|
|10||Wells Fargo & Co.||1930||USA||19,362|
|13||Mizuho Financial Group||1752||Japan||4,884|
|15||Sumitomo Mitsui Financial Group||1649||Japan||4,884|
|20||Bank of Communications||1209||China||11,938|
|21||Postal Savings Bank of China||1189||China||11,938|
|22||Lloyds Banking Group||1010||UK||2,565|
|23||Royal Bank of Scotland Group||986||UK||2,565|
|25||Toronto-Dominion Bank (TD Bank)||929||Canada||1,640|
|27||Royal Bank of Canada||892||Canada||1,640|
|29||Industrial Bank (China)||872||China||11,938|
|32||China Merchants Bank||855||China||11,938|
|33||China CITIC Bank||855||China||11,938|
|34||China Minsheng Bank||848||China||11,938|
|35||Shanghai Pudong Dev. Bank||843||China||11,938|
|39||Banco Bilbao Vizcaya Argentaria||772||Spain||1,307|
|42||ANZ Banking Group||700||Australia||1,390|
|48||National Australia Bank||595||Australia||1,390|
|49||China Everbright Bank||578||China||11,938|
|IMF Rank 2017||Country||No. of banks in Top 50||GDP ($B)|
GDP Data Source: International Monetary Fund, 2017 – http://bit.ly/2GWSSPG
When I look at this data, it opens up a number of questions for me which I would like to understand.
- Have big banks globally been able to reach their scale as a result of their market dominance or because of the policies and regulations in their original countries?
- Is it even important to have big banks in a country?
- Why are Indian banks so small compared to banks in other countries despite the relatively significant size of the Indian economy?
- Does the small size of Indian banks mean anything negative for our country?
- What are the various things which can be done to increase the sizes of Indian banks?
- Between PSU banks and private sector banks, which one is more poised to grow to a larger size over the next few years?
In my next post I will share an interview with an expert who can help us understand this better.