Higher operating revenue and lower taxes delivered strong results for banks in North America.
Banks across the US earned solid profits last year, as lending picked up in a strong economy and tax rates fell. Canadian banks, particularly those with operations south of the border, also benefited from rising interest rates in the US.
“Loan balances expanded, net interest margins improved and the number of problem banks continued to decline,” notes Jelena McWilliams, chair of the Federal Deposit Insurance Corporation.
Earnings at FDIC-insured banks rose 44% last year, as net interest income increased by 8.1% over 2017. The average net interest margin was 3.48% in the fourth quarter of 2018, up from 3.31% in the final quarter of 2017. The number of banks on the FDIC’s problem-bank list declined from 71 to 60 in the fourth quarter of last year. That’s the lowest figure since the first quarter of 2007, just before the global financial crisis hit.
Still, McWilliams cautions that the recent flattening of the yield curve “may present new challenges in funding and lending” and urged banks to remain prudent in managing their risks.
While many global banks have retreated to their home markets, Citi remains a truly global bank. It is the leading cash-management provider to US companies in every major geographic region around the world and Global Finance’s choice as 2019’s Best Bank in North America. Citi has 200 million customer accounts and does business in more than 160 countries. The bank is leveraging its global scale, wide product range and investment in technology to provide the best possible customer experience.
Global Finance named Citi’s Treasury and Trade Solutions business the Best and Most Innovative Corporate/Institutional Digital Bank of 2018. Citi Smart Match, created in partnership with fintech firm HighRadius, uses artificial intelligence and machine learning to help corporate clients automate the matching of open invoices to payments. On the consumer side, Citi is increasing the speed at which it makes new digital solutions available.
Our US winner, Bank of America, has also grown its digital and mobile channels rapidly. Both Erica, the artificial intelligence-driven virtual assistant in its mobile app, and Zelle, the person-to-person payments platform the bank co-owns, now count nearly 5 million users.
BofA leadership drew a picture of a prudent, efficient, customer-focused institution in reporting its results. “By adhering to responsible growth, the 200,000-strong team at Bank of America produced record earnings in 2018 of $28.1 billion,” CEO and Chairman Brian Moynihan said in a statement. “Our capital, liquidity and capacity to serve clients are at record levels.” Moynihan noted that attention to expenses led to a $30 billion reduction in the bank’s expense base since 2010. “Positive operating leverage—meaning the change in revenue outpacing the change in expenses—has resulted in an efficiency rate of 58.5% for 2018,” he continued, “transforming Bank of America into one of the most efficient firms in our industry.”
In Canada, Royal Bank of Canada is the leader by market capitalization and is Global Finance’s choice as the country’s best bank. RBC has 16 million largely satisfied customers, including 6.7 million digital users. Some 45% of its executives are women. Earnings in 2018 rose 8% to C$12.4 billion (US$9.3 billion) and return on equity was 17.6%.
In the annual report, Dave McKay, RBC president and CEO, says, “Our financial performance demonstrates how we are building long-term franchises and delivering a premium return on equity, even as we invest in creating the bank of the future and pursue our focused growth strategy in Canada, the US and key global markets.”
Our winner in Bermuda, Butterfield Bank, enjoyed its second consecutive year of record profits in 2018, with net income up 27.4%, to $195 million. The core return on average common equity was 25.8%, an increase of 320 basis points from 2017. “Our strong results were driven by a well-positioned investment portfolio,” said CEO and Chairman Michael Collins in a statement, while also crediting a “conservatively underwritten loan book with growth in Central London to high-net-worth clients, diversified fee businesses, disciplined expense and capital management.”
BEST BANKS IN NORTH AMERICA 2019
|Canada||Royal Bank of Canada|
|United States||Bank of America|