China's Banking Sector : Leaders in the World

Chinese banks are now global leaders not just by asset base but also brand value, according to the latest version of Brand Finance Banking 500, which shows the combined value of Chinese banks has surpassed that of US banks for the first time.

Industrial and Commercial Bank of China is the world’s most valuable bank with a brand value worth $47.8 billion, representing a 32 percent year on year growth.

Brand Finance's CEO David Haigh, said: "Chinese banks are being carried along in the slipstream of industrial giants as they grow and expand into international markets. Facilitating international deals boosts revenues, but more importantly, enables the banks to build their reputations with potential clients across the world."

Marketing investment and the brand's credibility with customers, staff and shareholders, among other factors, are all taken into consideration in calculating brand value. Essentially, the ranking rates how a bank's soft values translate into performance.

The report also shows Chinese banks as having an aggregate total brand value of $258 billion, accounting for 24 percent of the total brand value of the top 500 global banks by brand value, in comparison to 23 percent of aggregate US banks.

In addition to the Industrial and Commercial Bank of China, the China Construction Bank and Bank of China also showed rapid brand value growth of 17 percent and 13 percent respectively. Harbin Bank’s brand has trebled in value in the course of 2016 to $811 million, representing the fastest-growing bank by brand value in 2016.

The success of the Chinese banks came at the expense of US banks, such as Wells Fargo, which once topped this list. Wells Fargo's fake account scandal, which led to court fines in 2016, contributed to a 6 percent fall in brand value to $41.6 billion.

WORLD'S BIGGEST BANKS BY ASSET SIZE



However while we publish this data one question which comes to my mind is about te ideal size of banking system for a economy and also a bank itself to perform most efficiently and without risks.

A country’s financial sector is important for real economic activity as the size of an efficient financial sector not only affects the level of output by allocating productive capital more efficiently but may also contribute to economic growth.
For example, in the EU-15, the financial system (banks, insurance and pension funds) makes a contribution to the economy of 5.3% of GDP in 2005 (Beck et al, 2012). The contribution of the Dutch financial system to GDP is 6.8%. Goldsmith (1969) was the first one who empirically showed a positive correlation between the size of the financial sector and long-run economic growth.

Size of the banking system.

 1. One way to ensure the risk is secured is that banking sector should be related to the capacity of the country so that the government to be able to rescue troubled banks, the size of the sector should not be too large compared to the size of the country.
 It can be as a ratio of its value of banking assets to GDP (e.g. World Bank, 2005; Beck, Demirgüç-Kunt and Levine, 2010).
And secondly it can be measured as book value of equity over GDP (e.g. Dermine, 2000; Dermine and Schoenmaker, 2010).


2.The second way which is based on the follow-the-client principle, states that the banking sector should support its clients (Grosse and Goldberg, 1991; Brimmer and Dahl, 1975).
According to this view, the size of the banking sector should be in line with the financial needs of households and firms. As multinationals typically prefer to use a main bank of their home country with which they have a good strategic relationship (KPMG, 2011), this means that home banks should follow their clients abroad to service their business needs fully. The choice for a main bank from the home country is revealed preference of multinationals.

Looking at the data of the few countires with high credit based economies Singapore has 1.15 borrower for every 1 adult which means that there are multiple loans taken by each individual . Turkey comes second followed by Belgium , Croatia and Serbia .

In terms of overall credit to GDP Lebanon has highest ratio of 2.06 followed by China , Thailand , Italy , and Portugal .
In terms of NPA as a &% to Gross Loans Serbia with 33 % has highest NPA followed by Albania , Italy , Croatia and Tunisia

If we combine all these three parameters the overall best economies in terms of high credit but stil low risk and the three worst economies in terms of high risk and low pentration are

WORST 5 & BEST 5

Efficiency

China because of its population and depositors is one of the most efficien banking system followed by Singapore , Turkey , Paraguay and Brazil.

Malaysia which is ranked 3 in credut terms are ranked 8.

Depositors

China again ranks 1 followed by Italy , Brazil , Turkey and Croatia
Singapore is ranked 16th.

Number of Banks in Top 100

Now from all the above data we can summarize that China is the leader in banking today

1. In terms of Asset size Top 5 banks out of 20 are from Chinaa with top 4 ranks being held by Chinese banks

2. The Credit to GDP ratio of China is 1.93 and yet has an NPA of 1.67 % only which proves that it has a robust banking system

3. The depositors and customers managed per branch in China is highest at 2 Million .

4.The number of banks in world's largest 100 banks from China is 19 which is highest followed by USA at 10.