Four of Canada's biggest banks have landed among the top 10 in a global ranking of the strongest banks, although two of them have seen their rankings slip from last year.
According to data compiled by Bloomberg Markets magazine, CIBC, Royal Bank, Scotiabank and TD were ranked 3rd, 4th, 7th and 8th, respectively, on the publication’s annual ranking of the world’s strongest and safest lenders.
Bloomberg Markets maintains a list of global banks with at least $100 billion US in assets. This year, 78 firms made that cut-off.
The magazine then ranks the lenders based on five broad categories, including the size of their capital reserves, the amount they keep on hand to cover bad loans, the percentage of their assets that are inefficient or considered ‘non-performing’ and the amount they take in deposits.
Qatari bank rated No. 1
According to Bloomberg’s metrics, the world’s strongest bank is Qatar National Bank, the state-controlled financier that’s quickly grown to become the largest and one of the most profitable banks in the Middle East.
The Qatari bank displaced Singapore’s Oversea Chinese Banking Corp, which slipped to No. 2 on the list after being in the top spot for the past two years.
Among the Canadian banks. Royal Bank and Scotia saw their ranking improve, while CIBC and TD slipped. In TD’s case, the bank slipped from 4th in the world to 8th.
A particular source of strength for Canadian lenders is how big their Tier 1 capital ratios are. That’s the financial term for a lender’s cash reserves and how many of its own shares it owns — both of which are valuable assets to have act as shock absorbers if and when the economy hits a rough patch.
“Every year, our stress tests tell us we’re stronger than the previous year,” Toronto-Dominion bank president Ed Clark told the magazine. “You don’t have to go out on the risk curve to look after the shareholder, and it’s a foolish bet to do that,” he said.
Although they continue to compare favourably internationally, Canadian banks aren’t immune to the signs of slowdown in the global and domestic economies. Ratings agencies Moody’s and S&P each downgraded their outlooks for most of Canada’s major lenders late in the year. And official data shows Canadians’ debt loads continue to tick alarmingly high, a trend that could make the banks who loaned out all that debt vulnerable.
Another eye-opening placement on the list is U.S lender Citibank. Bloomberg Markets ranked America’s biggest lender in fifth overall.
Citi’s presence so high on the list is significant because it wasn’t that long ago — 2008 to be precise — that the bank was saved from bankruptcy thanks to a $45 billion US bailout from the U.S. government.
Citi was disqualified from Bloomberg’s rankings as recently as last year because it failed the U.S. Federal Reserve’s so-called “stress test” of banks that may be vulnerable to financial shocks.