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
8 BNP Paribas 2189 France 2,575
9 Bank of America 2188 USA 19,362
10 Wells Fargo & Co. 1930 USA 19,362
11 Crédit Agricole 1817 France 2,575
12 Citigroup Inc. 1791 USA 19,362
13 Mizuho Financial Group 1752 Japan 4,884
14 Deutsche Bank 1676 Germany 3,652
15 Sumitomo Mitsui Financial Group 1649 Japan 4,884
16 Barclays PLC 1496 UK 2,565
17 Société Générale 1454 France 2,575
18 Banco Santander 1414 Spain 1,307
19 Groupe BPCE 1303 France 2,575
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
24 Norinchukin Bank 981 Japan 4,884
25 Toronto-Dominion Bank (TD Bank) 929 Canada 1,640
26 UBS 920 Switzerland 681
27 Royal Bank of Canada 892 Canada 1,640
28 ING Group 891 Netherlands 824
29 Industrial Bank (China) 872 China 11,938
30 UniCredit 863 Italy 1,921
31 Goldman Sachs 860 USA 19,362
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
36 Morgan Stanley 814 USA 19,362
37 Crédit Mutuel 807 France 2,575
38 Credit Suisse 807 Switzerland 681
39 Banco Bilbao Vizcaya Argentaria 772 Spain 1,307
40 Intesa Sanpaolo 765 Italy 1,921
41 Commonwealth Bank 703 Australia 1,390
42 ANZ Banking Group 700 Australia 1,390
43 Rabobank 699 Netherlands 824
44 Scotiabank 680 Canada 1,640
45 Nordea 649 Sweden 542
46 Standard Chartered 647 UK 2,565
47 Westpac 642 Australia 1,390
48 National Australia Bank 595 Australia 1,390
49 China Everbright Bank 578 China 11,938
50 DZ Bank 537 Germany 3,652

 

Graph-1

IMF Rank 2017 Country No. of banks in Top 50 GDP ($B)
1 USA 6 19,362
2 China 12 11,938
3 Japan 4 4,884
4 Germany 2 3,652
5 India 0 2,654
6 France 5 2,575
7 UK 5 2,565
8 Brazil 0 2,081
9 Italy 2 1,921
10 Canada 3 1,640
13 Australia 4 1,390
14 Spain 2 1,307
18 Netherlands 2 824
19 Switzerland 2 681
23 Sweden 1 542

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.