British banks dive in world rankings as China thrives

CBI figures show that financial services firms are among the most optimistic about the UK’s prospects

UK banks have plummeted in world rankings since the financial crisis as they react to stricter regulation and demands for more cash on their balance sheets.

They now account for just 2.4 per cent of total global banking profits, down from 11 per cent before the financial crisis, according to The Banker magazine’s Top 1,000 World Banks ranking released today.

The only British bank left in the top 10, HSBC, slipped from 4th place to 5th place this year. In 2008 HSBC topped the ranking, with RBS in third place. They have been replaced by Chinese banks who between them now make 13 times the profits made by UK banks.

The top two banks in the world, ICBC and China Construction Bank, are Chinese, with two further Chinese banks ranked in the top 10. China accounts for one third of all banking profits, driving global banking profits to an all-time high of $920bn (£540bn).

Overall, the UK stands in eighth place globally when it comes to bank profitability.

At least the UK’s banks made a profit between them. Italy sits at the bottom of the countries table with losses of $35bn, while Portuguese and Irish banks also registered heavy losses last year.

Brian Caplen, editor of The Banker, said: “This is the first time since before the financial crisis that we have seen such a large annual increase in global banking profits. Apart from China’s contribution US banks are also doing well and have recovered much faster from the crisis than European banks.”

In terms of profit generation, African banks make the highest returns on capital of 24 per cent – double the average return for the rest of the globe and far exceeding average returns of only 4 per cent in Europe. This is despite African banks holding less than 1 per cent of global capital.

Meanwhile separate figures from the CBI show that financial services firms are among the most optimistic about the UK’s prospects, with companies in the sector expecting growth in the next quarter and planning to invest more in marketing and IT.

Matthew Fell, CBI director for competitive markets, said: “Firms are focusing on two key strategies for growth in the near-term: finding ways to retain existing customers, by offering them more products and services, and investing to attract new customers.”

He added: “The sector is still facing significant challenges. The adverse impact of regulation on business expansion has crept up the agenda and concerns about the ability of firms’ business systems to cope with new demand have risen.”