After years in the doldrums, soaring interest rate income has boosted bank profits, according to The Banker’s Top 1000 World Banks 2024 ranking, with some lenders reporting their best year on record in terms of pre-tax profits in 2023.

The annual list is compiled after all the world’s largest lenders release their yearly financial statements. Total bank pre-tax profit was $1.53tn last year, an overall average 14 per cent increase from the previous ranking and a far higher 41 per cent increase for Europe — with markets like Switzerland and Italy recording a 155 per cent and 72 per cent increase, respectively.

In the US, JPMorgan reported its highest-ever pre-tax profit at $61.6bn, the highest-ever pre-tax profit achieved by a US bank, and a 33 per cent increase from the previous year.

If higher interest rates have pushed up banks’ net interest income, they have also made borrowing more expensive and challenging for bank clients, and there are some early signs of discomfort in loan portfolios — specifically for so-called “stage 2” loans.

“After a record year, normalising interest rates will impact profitability in many banking markets around the world. But banks will also be looking at fee-earning business areas, rationalising costs and, particularly in Europe, at mergers and acquisitions to gain scale and compete with larger peers”, said Silvia Pavoni, editor-in-chief of The Banker.

Under IFRS international accounting standards, stage 2 indicates a loan whose credit risk has increased significantly since the previous reporting date. There have been noticeable increases in a number of large banking markets, with stage 2 loans now accounting for a higher share of total gross loans in Australia and Germany, at 17 per cent and 10 per cent, respectively, as property loans have been a significant area of concern for banks in both countries in recent years.

China’s banks continue to dominate the Top 1000 ranking, with ICBC, China Construction Bank, Agricultural Bank of China and Bank of China remaining the four largest banks globally by Tier 1 capital, which is a core measure of financial strength under the international Basel regulatory framework.

A further two Chinese banks, Bank of Communications and China Merchants Bank, are in ninth and 10th place.

ICBC’s Tier 1 capital now stands at $524bn, which is almost twice that held by its nearest non-Chinese peer, JPMorgan.

China Merchants Bank, whose Tier 1 capital increased by 12.58 per cent, leapfrogged the only previously remaining European lender in the largest 10 banks group, HSBC, at the very top of the ranking, which is now solely occupied by Chinese and US names.

Measured by asset size, however, HSBC remains the world’s seventh-largest bank, accounting for over 40 per cent of UK banking’s pre-tax profits. Two other European names, French banks BNP Paribas and Crédit Agricole, are also among the largest 10 lenders by assets. 

Elsewhere in Europe, banks in Italy and Switzerland reported their highest aggregate pre-tax profits in three decades’-worth of data; while lenders in several other countries, including the UK and Spain, achieved their highest pre-tax profits since the global financial crisis.

Contact:

Mark Staniland | mark.staniland@ft.com

About The Banker

The Banker is a flagship publication of the Financial Times Group, providing economic and financial intelligence for banking professionals globally. Founded in 1926, The Banker has built a reputation for objective and incisive reporting. It has published the Top 1000 World Banks rankings for over five decades.

Silvia Pavoni is the editor in chief of The Banker. She joined the FT Group in 2005 and was most recently the founding editor of Sustainable Views, a new service for sustainability professionals. 

About the Financial Times

The Financial Times is one of the world’s leading business news organisations, recognised internationally for its authority, integrity and accuracy. The FT has a record paying readership of 1.2mn, more than 1mn of which are digital subscriptions. It is part of Nikkei Inc., which provides a broad range of information, news and services for the global business community.