GlobalData, a leading data and analytics company, analyzed the year-on-year (YoY) change and 5-year compound annual growth rate (CAGR) in revenue (interest income + non-interest income), net profits and total assets of the top 25 publicly-traded global banks by revenue. The analysis suggests that the Chinese banks lead in the core growth parameters.

All the 25 banks reported YoY revenue growth with average growth rate of 10.3%. Lloyds Banking, Royal Bank of Canada and Credit Agricole reported over 15% growth. Lloyds Banking was the major gainer with a growth rate of 60.7% on account of exceptional rise in net trading income, which stood at GBP18.3bn in FY2019, as compared to net trading loss of GBP3.9bn in the previous year. The gain also helped the bank achieve 5-year CAGR of 12.8% in its revenue.

Royal Bank of Canada was benefitted from about 10% growth in net interest income from personal and commercial banking, and wealth management units and 33% rise in insurance business. Credit Agricole reported improvement in its revenue from all its business units except specialized financial services.

On the profitability front, major gainers, which reported over 15% of YoY growth were Postal Savings Bank of China (PSBC), Banco Bradesco and China Merchants Bank. Expansion in retail banking and intermediary businesses helped PSBC to grow substantially. Banco Bradesco witnessed significant rise in profitability in both its business units. On the other hand, China Merchants Bank’s continued upgradation in terms of digital transformation of retail finance business was instrumental behind its profits.

There were eight players that witnessed YoY decline in profitability, of which major losers were HSBC, Mitsubishi UFJ, Lloyds Banking and Societe Generale.

Parth Vala, Company Profiles Analyst at GlobalData, comments: “HSBC’s substantial goodwill impairment related to European commercial banking, and global banking and markets businesses took a heavy toll on its profits.”

As a part of restructuring, HSBC intends to undertake a slew of measures including large layoffs and assets sale of about US$100bn in the US and Europe over the course of the next three years.

Mitsubishi UFJ’s profit was affected by decline in net gains on equity securities, extraordinary losses from one-time amortization of goodwill of overseas consolidated subsidiaries, and higher SG&A expenses and credit costs related to coronavirus concerns. The current year profit declines also weighed-down the 5-year CAGR of both the banks.

Lloyds Banking’s profitability suffered due to 226.7% YoY rise in payment protection insurance provision, while Societe Generale’s restructuring costs related to the streamlining its global banking and investor solutions business to focus on profitability areas, and reduction in revenues due to the selling off of assets weighed negatively on its profit growth.

The top 25 witnessed average assets growth of 6.2% with Wells Fargo and Shanghai Pudong Development Bank registering the lowest and highest growth, respectively. Wells Fargo’s assets growth was restricted due to the Fed’s imposed balance sheet limit of US$1.95 trillion. An impressive loan growth of 12% in local and foreign currencies enabled Shanghai Pudong Development Bank to achieve the highest assets growth in the top 25.

Mr Vala concludes: “Given the unprecedented financial trauma that COVID-19 has initiated, the global banking sector is going to be under pressure in the near future as there would be rise in solvency problems and increase in debt defaults. However, taking lessons from the 2008 financial crisis and implementing G20 financial regulatory reforms, global banking sector has become more resilient and is in a better position and well-prepared to withstand and mitigate the current economic crisis.”