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Summary
- HSBC was the only European bank in the global top 10 list and saw its ranking improve in the Top 1000 world bank survey by The Banker.
- HSBC was placed at eighth position with Tier 1 capital of $160.2 billion.
According to the latest rankings of top 1000 world banks, HSBC, the largest bank in the UK, saw its ranking improve by one place at the eighth position on the list compiled by The Banker, an international financial affairs publication. Also, HSBC was the only European bank in the Top 10 list of world banks topped by the ICBC Bank based in China with Tier 1 capital of $440 billion.
Banker Ranking and Tier 1 Capital
Since 1926, The Banker publication has been a trusted source for banking information. Annually The Banker publishes the Top 1000 world bank ranking to honour the global leader in the banking industry for their achievements. The ranking of the largest bank is done based on Tier 1 capital, which is a key parameter of bank’s strengths and financial stability. Also, more than 120 data points are evaluated before the ranking is published.
Tier 1 capital is a regulatory measure that shows a bank’s financial strength and stability, which includes core capital like banks common shares, retained earnings. According to Banking regulations, banks must hold a minimum of 6% capital ratio as Tier 1 capital. The reason for holding capital is basically to protect the bank in case of adverse losses.
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HSBC
FTSE 100 listed, HSBC (LON:HSBA) is the largest bank in the UK, serving more than 40 million customers and operates in more than 64 countries. The financial products offered by the banks vary widely as per the customers’ needs. The bank operates through key segments like retail and commercial banking as well as wealth management.
HSBC managed to move one place up in the latest rankings at eighth position with an increase of 7.96% in Tier 1 capital at $160.2 billion (£115 billion).
Overall, the Banking Industry in the UK saw a 53.08% drop in profits which was impacted by the dual blow of the Covid-19 pandemic and Brexit, which led to an increase in the allowance for bad loans and put downward pressure on banks’ profitability. The UK banking sector reported aggregate Tier 1 capital of $437.5 billion during the challenging year for the country and was ranked fifth largest in the world.
It was the dual impact of Brexit and Covid-19 that the top five banks in the UK saw a decline in pretax profits:
Lloyds Banking (LON:LLOY) saw a 71.72% drop in pretax profits, but its Tier 1 capital increased by 15.27% YoY, which was the highest among all UK banks.
Barclays (LON:BARC) reported a 28.72% drop in profits, but its assets saw a growth of 19.93%.
HSBC reported a 34.2% fall in pretax profits, though its Tier 1 capital rose by 7.96%.
Standard Chartered’s profits dropped by 56.56%.
NatWest Group (LON:NWG) was the fourth largest in the country, which reported losses in the financial year 2020.
Of all the global banks covered by The Banker, there was a combined drop of 19.2% in profits, with the Asia-Pacific being the only region that saw profit growth.
HSBC has future restructuring plans to reverse years of underperformance. Recently the bank announced the sale of its retail banking operations in France as part of the banks restructuring process.
The HSBA shares were trading at GBX 423.30, down by 0.98% on 28 June at 9.35 am GMT+1 with a market cap of £87.3 billion. In the last 1-year, the stock has delivered a 10.82% return to its shareholders.
