Last year, I wrote quite a few posts on the subject of the credit crunch, aka the GFC (“Global Financial Crisis”) or GD2 (“Great Depression 2″). Whatever you want to call it, it has been unfolding for almost two years, and does not show any signs of letting up yet. The hardest hit to date have been banks. Many, including Northern Rock, Bear Stearns, Lehman Brothers, Wachovia, Washington Mutual and every Icelandic bank have fallen along the way, via bankruptcy, merger or Government bailout. Others limp along with the odd adrenaline shot from Government to shake a little more life back into the patient.
Just one of these terminal patients is the Royal Bank of Scotland, whose market capitalization has fallen by 90% over the last two years, despite large injections of capital by the UK Government. The bank’s chief executive, Sir Fred Goodwin, has just resigned and was described by the Telegraph as “the most reviled man in Britain”. The once gargantuan Citigroup has shrunk even more and is now 92% smaller than it was in January 2007. In contrast, whether by good luck or good management, Australian banks have held up well. Nab has been the worst affected, thanks in part to some pesky CDO write-downs, shrinking by 55%. Westpac has weathered the storm better than any major bank in the world, with a fall of only 17% in its market capitalisation. (Quick note to shareholders: your investment will have fallen by more than this since market capitalization equals share price times number of shares and like all banks, Westpac have raised additional capital during the course of the crisis and of course they have also bought St George).
The differing fortunes of the world’s banks in the face of the GFC has led to a significant re-ranking of the size scoreboard. The chart below was inspired by JP Morgan’s “pea chart”, which was doing the rounds last week*, and shows a ranking of 25 of the largest banks today and compares their current market capitalization to that of January 2007. How much has changed in two years! Once the largest bank in the world, Citigroup now languishes at number 20 in this list and is smaller than Westpac, CBA and nab. Even ANZ is now larger than Deustche Bank. How the mighty have fallen!
For those who are interested in poring over the gory details, I have posted a monthly history of the market capitalization of these and a number of other banks over on Swivel. All the figures have been converted to US dollars based on exchange rates at month end. All the data was sourced from Bloomberg. I have tried to include all the major publicly listed banks around the world (which excludes Rabobank, for example), but do let me know if I have missed any important ones.
* If you follow the link and look at the picture, please read the comment about the somewhat misleading use of circles in the chart!
UPDATE: Thanks to BC for pointing out that I completely forgot about Canadian banks! I have updated the chart, which now includes Royal Bank of Canada, Toronto-Dominion and Bank of Novia Scotia. These three have pushed ING, Deutsche Bank and Nordea from the top 25. The original chart is available here. If you know of any other big banks I have omitted, please let me know!
Possibly Related Posts (automatically generated):
- How Big Are Australian Banks? (4 March 2009)
- Australian Banks Get A Government Guarantee (13 October 2008)
- Market Capitulation (24 October 2008)
- US Treasury: Proud New Owner of America’s Banks (14 October 2008)
{ 13 comments… read them below or add one }
very insightful Mule. The aggregate market cap from your sample at Jan 2007 was $3.1 trillion. It is now $1.0 trillion. $2.1 trillion dollars has vanished in a very short space of time. At least Bernie Maddof’s ponzi scheme lasted the best part of 20 years and only cost the punters a lazy $50 billion.
Here’s the revised chart which depicts area, not diameter: http://alphaville.ftdata.co.uk/lib/inc/getfile/4214.gif
Bernie really was an amateur compared to these pros
it would be interesting to see how they have fared relative to the average market cap – JPM has clearly outperformed while Citi has underperformed
based on your swivel data the bank which has the best relative performance is…..Westpac! It relative share of market cap has increased by 155%. Citi is 3rd worse with a 76% decrease.
Can’t wait til Westpac is number 50 in the world again!
I don’t see a single Canadian Bank here… currently listed as the strongest financial system in the world.
Oversight?
@BC: Good point! I’ll add them in. Of course, the Canadian banks have not completely escaped difficulties, as evidenced by TD pulling their business out of Australia a few weeks ago.
@BC: I’ve now updated the chart. As you can see, although RBC’s market cap. did fall 44% over the two years, it is still bigger than any of the Australian banks and TD, which fell 37%, is bigger than all but Westpac.
You may have answered this before, but what’s going on when politicians of all stripes claim the AAA status? They were doing it again tonight on QandA. What is the statistical malfeasance here?
This comment was originally posted on http://www.stubbornmule.net/)“>A Stubborn Mule’s Perspective
Here is the Q&A transcript where Costello said the following:PETER COSTELLO: No, it was established in 1997. We now have four Australian banks which are amongst the only 12 banks in the world that are AA rated. We now have four Australian banks which are amongst the 20 largest by market cap. I think your own deputy prime minister recently told the Davos Forum, quite rightly, that Australia had a very successful system of financial regulation.At least, unlike Duffy, Costello knows that the banks have a AA rating not AA. However, by my reckoning, only two of the four majors are in the top 20 by market capitalisation and there are at least 21 AA rated banks not 12:
Santander
Wells Fargo
Westpac
BNP Paribas
CBA
BBVA
nab
Hang Seng Bank
ANZ
Banesto
HSBC
Royal Bank Of Canada
Intesa Sanpaulo
Bank Of New York Mellon
Toronto-Dominion
Bank Of Nova Scotia
Credit Agricole
Societe Generale
Nordea
ING
Svenska Handelsbanken
This comment was originally posted on http://www.stubbornmule.net/)“>A Stubborn Mule’s Perspective
I just listened to Keating’s speech to the Lowy Institute and he is perpetuating the same errors. He claimed the majors were among only 12 AA rating banks and that all were among the top 9 banks in the world. When will they get it right?
This comment was originally posted on http://www.stubbornmule.net/)“>A Stubborn Mule’s Perspective
Yes, the world’s 3 biggest banks are all Chinese, but they are also all State owned. So there is no problem in them accessing China’s massive foreign exchange reserves which has been done in recent years.
And yes, there are sections of the media that need to check their facts, check them again and get them right. That’s what researchers are for. The problem is when so called facts like these get out initially, it’s very difficult to correct them. This can be said for any number of issues, not just financial.
This comment was originally posted on http://www.stubbornmule.net/)“>A Stubborn Mule’s Perspective
@Orange Tim: I agree that Chinese banks are a different case. Not only are they State-owned, but the transparency of their reporting could be called into question. Given some of the stats I’ve heard about vacant office space in major Chinese cities, there biggest problems may still be to come.
It is quite amazing how these sound-bite stats get a life of their own. At least the Duffie AAA furphy doesn’t seem to have been repeated in the press.
This comment was originally posted on http://www.stubbornmule.net/)“>A Stubborn Mule’s Perspective