Author: Gordon Platt

ANNUAL SURVEY

THE BEST EMERGING MARKET BANKS 2009


In our 16th annual survey of top banking performers in emerging markets, we name those banks that are consistently providing high levels of service in fast-evolving markets.

By Gordon Platt


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The results of the best emerging market banks varied tremendously in the past 12 months, with some banks requiring government bailouts and others posting record profits. The performances largely reflected the varying economic conditions in the countries and regions in which particular banks are located.


In Central and Eastern Europe, for example, the past year was an extraordinarily difficult one, with rising loan losses and falling currencies taking a toll on even the best banks. In Africa the picture was kaleidoscopic, with neighboring countries experiencing vastly different results. Some banks benefited handsomely from fast economic growth in the region, while avoiding the pitfalls. Many banks in the Middle East remained profitable, although some were caught up in the excesses of real estate and stock market lending.


In Asia the bigger economies, such as China and India, performed well, as growing domestic demand offset some of the effects of the global economic downturn. Many banks in the region continued to post very sizable increases in earnings and strong growth in loan portfolios.


The International Monetary Fund warns that corporate and banking sector vulnerabilities are becoming mutually reinforcing in several emerging economies, particularly in the CEE region and the Commonwealth of Independent States. Relatively high requirements to roll over debt could rise further as some debt claims are accelerated due to breaches in original covenants, the IMF says. Defaults in the corporate sector are widely expected to rise, it says, which could further strain bank balance sheets. Many banks are already curtailing credit growth, exacerbating the financial constraints for companies and businesses, according to the IMF.


In the most needy emerging markets, many banks are extending a helping hand and providing social services. Banks in Africa are involved in fighting diseases, as well as working to alleviate poverty. They are making monetary contributions and distributing insecticide-treated nets to combat malaria.


With economic stimulus programs in place, the larger emerging market economies could lead the recovery in the global economy. Interest rate cuts and fiscal spending will help to promote growth, even as corporate profits continue to weaken. Many emerging markets were isolated from the effects of the subprime mortgage crisis and credit crunch in the developed countries.


In selecting this year’s best emerging market bank winners, we relied as always on input from industry analysts, corporate executives and banking consultants, as well as research by Global Finance’s reporters and editors. Our selection criteria included knowledge of local conditions and customer needs, growth in assets, profitability, strategic relationships, experienced staff, innovative products, competitive pricing, level of non-performing loans and use of technology.


Altogether, we chose the best emerging market banks in five regions of the world and 99 countries. The winners are not always the biggest banks but, rather, the best—those with the qualities that corporations should look for when choosing a bank. These are banks with effective risk management systems, quality service and good corporate governance. Many are involved with microfinance and lending to small and medium-size businesses, as well as meeting the needs of major corporations. The best banks offer the products and services necessary to promote development and improve living standards in the countries in which they operate.