This year’s rankings of the Safest Commercial Banks recognize institutions that continue to successfully navigate a challenging economic environment brought on by interest rates rapidly rising to combat global inflation. As global central banks have taken an aggressive monetary policy stance to battle rampant post-pandemic inflationary pressures, the sustained interest rate increases have presented bank management with both opportunities and risks.
With higher rates came benefits to the traditional banking model in the form of expanded net interest margins, and banks with asset-sensitive balance sheets fared even better as the interest rate on loans repriced faster than rates on the banks’ deposit base. However, higher rates will pressure loan growth going forward as demand for credit wanes, and overall loan portfolio asset quality remains a concern as the impacts of inflation and sustained higher interest rates weaken the repayment ability of customers. Currently, most central banks appear to be nearing the end of restrictive monetary policy and must now carefully evaluate the degree to which additional rate hikes may risk economic recession in their respective regions and jurisdictions.
The rapid and successive rate increases exposed significant asset-liability management issues at some banks in the form of growing valuation losses in the sector’s portfolio of loans and fixed income securities. The risk of these unrealized losses for some institutions contributed to fears of a looming banking crisis during the first half of 2023 and coincided with the failure of three prominent US regional banks: Silicon Valley Bank, First Republic and Signature Bank.
In Europe, meanwhile, ongoing mismanagement and financial deterioration at Credit Suisse quickly eroded depositor and investor confidence, prompting Swiss regulators to swiftly arrange a rescue plan, with UBS acquiring the bank in the largest merger since the global financial crisis. Citing execution risk from this combination, Fitch downgraded UBS in June resulting in UBS falling 10 spots in our ranking to No. 29. Additional names slipped with the August downgrade by Fitch of the United States sovereign rating, which prompted the agency to cut the ratings of the US Farm Credit banks in our rankings: each falling at least five spots. Deutsche Apotheker- und Aerztebank fell 15 places to No. 33, its score having suffered as a result of Moody’s withdrawing its ratings for the bank.
On a positive note, the rating agencies recognized the improving credit profile of a number of banks, with upgrades that boosted their positions in our rankings. This includes Kiwibank, which rose 10 spots to No. 26 following a Fitch upgrade. Citing improvements in asset quality, funding profile and capitalization, Moody’s upgraded Hana Bank in August leading to a rise in its position to 41 from 47 in our ranking. Two entities were upgraded based on improved sovereign support assumptions, a critical component in bank rating methodologies. Jumping to the No. 42 spot from No. 50 last year, Qatar National Bank benefited from an S&P upgrade of the sovereign rating of Qatar. The agency attributed the move to improvements in the government’s fiscal position and subsequently lifted the bank’s ratings based on a “high likelihood of receiving government support if needed.”
Moody’s cited the increased probability of Austrian government support for the banking sector, raising Erste Group Bank’s ratings and thereby boosting its score enough for it to become a new entrant this year at No. 50. Bank of America is another new entrant this year at No. 46, as the bank benefited from a Moody’s upgrade in May based on its improved earnings profile, strengthened capital position and restrained risk appetite.
Methodology: Behind the Rankings
Under the methodology for the World’s Safest Banks rankings, commercial banks that are majority state-owned or receive sponsorship by their governments or regional bodies are excluded. Institutions here may operate in the same markets as state-sponsored competitors but don’t benefit from government backing. Additionally, institutions which are wholly owned by their parent company are ineligible under our criteria.
|The 50 Largest Commercial Banks|
|Name||Domicile||Fitch Rating||Fitch Score||Moody’s Rating||Moody’s Score||S&P Rating||S&P Score||Total Score|| Total Assets
|Royal Bank of Canada||Canada||AA-||7||Aa1||9||AA-||7||23||1,359,411||1/31/23|
|Oversea-Chinese Banking Corp||Singapore||AA-||7||Aa1||9||AA-||7||23||417,504||12/31/22|
|United Overseas Bank||Singapore||AA-||7||Aa1||9||AA-||7||23||375,026||12/31/22|
|Banque Pictet & Cie||Switzerland||AA-||7||Aa2||8||NR||6.5||21.5||48,513||12/31/22|
|Bank of Nova Scotia||Canada||AA-||7||Aa2||8||A+||6||21||992,680||1/31/23|
|Bank of Montreal||Canada||AA-||7||Aa2||8||A+||6||21||829,719||1/31/23|
|Canadian Imperial Bank of Commerce||Canada||AA-||7||Aa2||8||A+||6||21||666,428||1/31/23|
|First Abu Dhabi Bank||United Arab Emirates||AA-||7||Aa3||7||AA-||7||21||302,249||12/31/22|
|Hang Seng Bank||Hong Kong||AA-||7||Aa3||7||AA-||7||21||242,547||12/31/22|
|Federation des Caisses Desjardins du Quebec||Canada||AA-||7||Aa2||8||A+||6||21||147,768||12/31/20|
|Commonwealth Bank of Australia||Australia||A+||6||Aa3||7||AA-||7||20||817,007||12/31/22|
|National Australia Bank||Australia||A+||6||Aa3||7||AA-||7||20||702,098||3/31/23|
|OP Corporate Bank||Finland||NR||6||Aa3||7||AA-||7||20||100,533||12/31/22|
|Banque Federative du Credit Mutuel||France||A+||6||Aa3||7||A+||6||19||735,488||12/31/22|
|HSBC Continental Europe||France||AA-||7||A1||6||A+||6||19||298,311||12/31/22|
|Deutsche Apotheker- und Aerztebank||Germany||AA-||7||NR||5.5||A+||6||18.5||57,793||12/31/22|
|Farm Credit Bank of Texas||United States||A+||6||Aa3||7||NR||5.5||18.5||35,990||12/31/22|
|Bank of China (Hong Kong)||Hong Kong||A||5||Aa3||7||A+||6||18||447,121||12/31/22|
|Bank of New York Mellon||United States||AA-||7||A1||6||A||5||18||405,783||12/31/22|
|Kookmin Bank||South Korea||A||5||Aa3||7||A+||6||18||404,429||12/31/22|
|Shinhan Bank||South Korea||A||5||Aa3||7||A+||6||18||389,072||12/31/22|
|Hana Bank||South Korea||A||5||Aa3||7||A+||6||18||380,306||12/31/22|
|Qatar National Bank||Qatar||A||5||Aa3||7||A+||6||18||326,552||12/31/22|
|National Bank of Canada||Canada||A+||6||Aa3||7||A||5||18||301,780||1/31/23|
|State Street||United States||AA-||7||A1||6||A||5||18||301,450||12/31/22|
|Northern Trust||United States||AA-||7||A2||5||A+||6||18||155,037||12/31/22|
|Bank of America Corporation||United States||AA-||7||A1||6||A-||4||17||3,051,375||12/31/22|
|BNP Paribas Fortis||Belgium||A+||6||A2||5||A+||6||17||373,728||12/31/22|
|Woori Bank||South Korea||A||5||A1||6||A+||6||17||347,419||12/31/22|
|Erste Group Bank||Austria||A||5||A1||6||A+||6||17||345,434||12/31/22|