With profits squeezed and fintech expanding, banks are re-evaluating their business models.

Author: David Sanders

At the beginning of October, the Reserve Bank of Australia announced a quarter-point cut in the nation’s benchmark interest rate, to an all-time low of just 0.75%; and the administration pressed the banks to pass the cut along to clients. National Treasurer Josh Frydenberg told reporters in Sydney, “It is the government’s expectation that the banks will pass on this 25-basis-point rate cut in full.”

Yet within days, Australia’s four major banks made clear they would pass along only a portion of the cut to customers, essentially pocketing the rest, citing the enormous pressure of the current interest-rate environment. “Bank fundamentals are increasingly challenged with ultralow interest rates,” wrote Jonathan Mott, a banking analyst at UBS in Sydney, in a research note, adding that the research team expects “banks to rebase ROEs [returns on equity] to more realistic levels for an ultralow-rate environment.”

Factors forcing change on the sector include new regulatory requirements, heightened geopolitical uncertainty, rapidly developing technology and new financial-market players.

While the threshold for inclusion in the World’s Safest Commercial Banks has remained unchanged—a score of at least 17—our 2019 rankings reflect some shifts due to regulatory changes, resulting in a number of upgrades.

DNB Bank, Hang Seng Bank, BNP Paribas, Credit Agricole and BPCE have boosted debt levels in order to comply with total loss-absorbing capital and minimum for own funds and eligible-liabilities requirements, which benefit senior creditors. BPCE and Kookmin Bank are new entrants this year after fundamental improvements in their credit profiles resulted in upgrades, replacing Nationwide Building Society and Banco Santander Chile.

As banks face the possibility that slow growth and ultralow rates may be a “new normal,” they are beginning to reassess their business models, seeking to chart a course to 21st century profitability by harnessing digital capabilities and technology. Digital transformation will accelerate the evolution of the entities ranked among our Safest Commercial Banks.

Innovation has always been critical in finance, and banks are embracing this challenge with the development of digital platforms. Much of the early hype has focused on the retail segment, but commercial clients are also benefiting enormously from new digital tools that help with everything from compliance to tracking one’s carbon footprint along an entire supply chain. Analytical tools and algorithms that utilize artificial intelligence, cloud technology and blockchain are yielding new features that speed and facilitate the business of business.

For many institutions, this represents a tremendous shift; but the pace of technology in financial services is accelerating significantly. Consequently, banks continue to evaluate outsourcing of certain functions to increase efficiency and reduce costs. Because this complex issue carries many potential risks, as of September the European Banking Authority has in place revised guidelines for third-party outsourcing, designed to unify policy across jurisdictions and between different types of financial institutions.

Protecting customer data has always been a priority for the banking sector, especially in commercial banking. As digital platforms have developed, regulatory mandates have followed—such as the General Protection Data Regulation, which has been in effect in Europe since May 2018 and addresses data privacy. The European Commission introduced a second iteration of its Payment Services Directive, which established a framework for ensuring consumer-data protection while increasing participation and competition among payments companies within the European Union.

Our criteria exclude banks that are majority-owned by governments or receive sponsorship by their governments or regional bodies. The institutions included in our rankings operate in the same markets as their state-sponsored competitors but don’t benefit from government backing.

WORLD'S SAFEST BANKS 2019 — The 50 Safest Commercial Banks

Rank

Company Name

Country

Fitch

Moody’s

S&P

Total Score

Assets ($ Mil.)

Statement Date

1

Royal Bank of Canada

Canada

AA

Aa2

AA—

23

1,021,770

30-Apr-2019

2

TD Bank

Canada

AA—

Aa1

AA—

23

1,005,270

30-Apr-2019

3

DZ Bank 

Germany

AA—

Aa1

AA—

23

594,157

31-Dec-2018

4

DBS Bank 

Singapore

AA—

Aa1

AA—

23

402,439

31-Dec-2018

5

Oversea-Chinese Banking Corporation

Singapore

AA—

Aa1

AA—

23

341,646

31-Dec-2018

6

Svenska Handelsbanken

Sweden

AA

Aa2

AA—

23

331,978

31-Dec-2018

7

United Overseas Bank

Singapore

AA—

Aa1

AA—

23

283,590

31-Dec-2018

8

Deutsche Apotheker- und Aerztebank

Germany

AA—

Aa1

AA—

23

51,961

31-Dec-2018

9

Swedbank

Sweden

AA—

Aa2

AA—

22

250,461

31-Dec-2018

10

DNB Bank

Norway

NR

Aa2

AA—

21.5

256,383

31-Dec-2018

11

Banque Pictet & Cie

Switzerland

AA—

Aa2

NR

21.5

29,780

31-Dec-2017

12

Bank of Nova Scotia

Canada

AA—

Aa2

A+

21

759,772

31-Oct-2018

13

ANZ Group

Australia

AA—

Aa3

AA—

21

694,368

31-Mar-2019

14

Commonwealth Bank of Australia

Australia

AA—

Aa3

AA—

21

682,915

30-Jun-2019

15

Nordea Bank

Finland

AA—

Aa3

AA—

21

631,583

31-Dec-2018

16

Westpac 

Australia

AA—

Aa3

AA—

21

619,905

31-Mar-2019

17

Bank of Montreal

Canada

AA—

Aa2

A+

21

617,358

30-Apr-19

18

National Australia Bank

Australia

AA—

Aa3

AA—

21

569,267

31-Mar-2019

19

Canadian Imperial Bank of Commerce

Canada

AA—

Aa2

A+

21

454,684

30-Apr-2019

20

SEB

Sweden

AA—

Aa2

A+

21

286,202

31-Dec-2018

21

HSBC France

France

AA—

Aa3

AA—

21

207,256

31-Dec-2018

22

First Abu Dhabi Bank

UAE

AA—

Aa3

AA—

21

202,585

31-Dec-2018

23

Hang Seng Bank

United States

A+

Aa2

AA—

21

200,666

31-Dec-2018

24

Federation des Caisses Desjardins du Quebec

Switzerland

AA—

Aa2

A+

21

115,505

31-Dec-2018

25

AgriBank

Netherlands

AA—

Aa3

AA—

21

109,772

31-Dec-2018

26

UBS

Norway

AA—

Aa3

A+

20

958,055

31-Dec-2018

27

Rabobank

Hong Kong

AA—

Aa3

A+

20

676,287

31-Dec-2018

28

CoBank

United States

AA—

Aa3

AA—

20

139,016

31-Dec-2018

29

National Bank of Kuwait

Kuwait

AA—

Aa3

A+

20

 90,327

31-Dec-2018

30

OP Corporate Bank

Finland

NR

Aa3

AA—

20

72,742

31-Dec-2018

31

AgFirst

United States

AA—

Aa3

NR

20

33,078

31-Dec-2018

32

Farm Credit Bank of Texas

United States

AA—

Aa3

NR

20

24,529

31-Dec-2018

33

BNP Paribas

France

A+

Aa3

A+

19

2,337,575

31-Dec-2018

34

U.S. Bancorp

United States

AA—

A1

A+

19

467,374

31-Dec-2018

35

LGT Bank

Liechtenstein

NR

Aa3

A+

18.5

35,089

31-Dec-2018

36

Credit Agricole

France

A+

Aa1

A+

18

2,124,447

31-Dec-2018

37

BPCE

France

A+

A1

A+

18

1,459,156

31-Dec-2018

38

Banque Federative du Credit Mutuel

France

A+

Aa3

A

18

612,918

31-Dec-2018

39

The Bank of New York Mellon Corp.

United States

AA—

A1

A

18

362,873

31-Dec-2018

40

Kookmin Bank

South Korea

A

Aa3

A+

18

318,344

31-Dec-2018

41

Shinhan Bank

South Korea

A

Aa3

A+

18

310,821

31-Dec-2018

42

State Street

United States

AA—

A1

A+

18

244,626

31-Dec-2018

43

Qatar National Bank

Australia

A+

A1

A+

18

236,786

31-Dec-2018

44

National Bank of Canada

New Zealand

A+

Aa3

A

18

199,719

31-Oct-2018

45

Northern Trust

United States

AA—

A2

A+

18

132,213

31-Dec-2018

46

Suncorp-Metway

Australia

A+

A1

A+

18

47,026

31-Dec-2018

47

Kiwibank 

New Zealand

AA—

A1

A

18

14,556

31-Dec-2018

48

HSBC Holdings

Belgium

AA—

A2

A

17

2,558,124

31-Dec-2018

49

ABN AMRO Bank

United Kingdom

A+

A1

A

17

436,736

31-Dec-2018

50

BNP Paribas Fortis

Belgium

A+

A2

A+

17

333,678

31-Dec-2018

Asset figures from Fitch, Moody’s, and company reports. Ratings valid as of Aug. 31, 2019.