Author: Gordon Platt


Bank of America

Bank of America turned in another solid earnings report in the second quarter, with all of its businesses delivering strong results and several setting records. Net income increased 10% to $5.3 billion. Revenue, net of interest expense, rose 7% to $22.8 billion. Net charge-offs declined 8% to $908 million.

“We achieved our 60% efficiency-ratio target, and we continued to manage credit risk carefully in line with responsible growth,” says Brian Moynihan, chairman and CEO. “This supports our plan to return $17 billion in capital during the next four quarters, including a 60% increase in the quarterly common dividend.”

Warren Buffett’s Berkshire Hathaway exercised warrants in August to acquire 700 million common shares of Bank of America, making Berkshire the bank’s largest shareholder. Bank of America could see its profitability continue to grow as interest rates rise. The strongest growth so far this year has come from the bank’s global banking business, which increased earnings by 36% on record revenue of $10 billion.

—Brian Moynihan, chairman and CEO




Fast-changing consumer behavior and technology-based solutions have opened up opportunities for banks that have been ahead of the curve in adopting digital technology to meet customers’ needs, like our regional winner for Western Europe, ING. “To foster growth and maintain our standing as a leading European bank, we strive to keep getting better every day,” says CEO Ralph Hamers. “Through the merger of two large banks in the Netherlands and the target operating model of our wholesale bank, we have gained experience in large transformational projects. I am convinced that our recently announced investment program and intention to converge toward a single digital-banking platform are necessary steps to enable ING to further improve the customer experience, further grow primary customers and lending, and increase efficiency.”

As a result, ING has attracted more than 3 million new customers since 2014 and last year enjoyed the top Net Promoter Score, a measure of customer satisfaction, in seven of its 13 retail markets. In the second quarter of 2017, ING’s earnings rose 5.9% to $1.6 billion. Net core lending increased by $7.6 billion. Sustainalytics ranked ING as the world’s most sustainable bank out of 395 banks measured in 2016.

—Ralph Hamers, CEO



Raiffeisen Bank International

Banks operating in many CEE countries have faced significant headwinds. The low interest rate environment has narrowed lending margins, while regulatory pressures and costs have increased, and some governments have brought in harsh new taxes. Probably no bank is more aware of this than Raiffeisen Bank International (RBI), our CEE regional winner, which is active in more countries across the region than any other bank. Since the financial crisis, it has faced some serious challenges, but it surmounted them through what CEO Johann Strobl calls “a comprehensive transformation program.” RBI “optimized its group structure, increased its transparency and profitability, reduced its complexity, improved its asset quality and strengthened its capital ratios,” Strobl says.

The focus in the first half of 2017 was on some positive developments relating to impairment losses. Net provisioning for such losses was down 81%. The good overall macroeconomic situation also had a positive impact on nonperforming loans. The NPL ratio was 7.3% at midyear, 1.3 percentage points lower than at the beginning of the year. Consolidated net profit rose 149% to $699 million.

—Johann Strobl, chairman and CEO




Santander, the Spanish bank with operations throughout the region and this year’s regional winner in Latin America, believes that one of the keys to its success in the region has been technology investments, which contributed $3.6 billion in attributable profit to Santander in 2016, for a 6.1% year-over-year increase (an 18.6% increase discounting currency adjustments). Brazil alone contributed 21% of the group’s profits. In Brazil, “loyal customers increased by 500,000 with digital advances (including the launch of biometrics) and product innovations helping improve the customer proposition,” Santander said in its 2016 annual report. “The change in business mix carried out in recent years helped control provisions and credit quality.”

With Latin growth poised to accelerate, Santander is positioned to benefit from improved growth and stability, says Antonio Cortina, the bank’s deputy director of economic research. “Since last summer, the economy in the region has been gradually improving,” he says. “Growth will reach 1.5% in 2017 and 3% in 2018. The bulk of the improvement will be in Brazil and Argentina.”

—José Antonio Álvarez, CEO



Industrial and Commercial Bank of China

ICBC is a behemoth of a bank, engaging in just about every activity one expects from a universal bank, and active not only across the region but around the globe. Despite the substantial risks inherent in the rapidly shifting Chinese financial landscape and the potential for much, much worse results, profits were up 2% in the first half of 2017.

In the cross-border field, ICBC was the biggest arranger of syndicated loans in Asia (outside Australia and Japan) in 2016, according to data from Thomson Reuters. Retail loans grew rapidly on ICBC’s balance sheet last year, with domestic residential mortgage lending up 28.8%. Meanwhile, loans to small and micro enterprises grew faster than all other types of loans in the same period. The bank is actively scaling back from sectors suffering from overcapacity and high leverage, but continues to enjoy a relatively competitive nonperforming-loan ratio of just 1.5%, below the Chinese commercial bank average of 1.7%. ICBC is also upgrading its financial technology: It rolled out a Big Data strategy last year, while launching nearly 1,000 projects to accelerate integrated innovation in technology and business.

—Yi Huiman, chairman



Arab Bank

Jordan-based Arab Bank has the most extensive banking network in the Arab world and uses this advantage to promote regional economic growth. The bank helps international companies enter Middle East markets, while supporting local companies in the region and globally. Arab Bank also produced 20% earnings growth last year, while maintaining its prudent risk standards.

Arab Bank is a genuinely regional financial institution, rather than a local bank with a regional presence. It has been on the ground in the Middle East since 1930, and knows local markets. The bank receives 75% of its revenue from outside of its home country. It maintains a global network of more than 600 branches in 28 countries, but it is in the Middle East where its serves niche markets better than any other bank. Its global network of treasury centers provides corporations with a wide range of products, including cash management, foreign exchange and trade finance. The bank is a market maker in MENA currencies and offers hedging solutions such as swaps, options and hybrid instruments, and capital market services.

—Nemeh Sabbagh, CEO



Standard Bank

Among the banks most likely to benefit from renewed growth in Africa is Standard Bank. The South African bank has made strides since the early 1990s in building a sophisticated franchise on the continent. Our regional winner, Standard Bank is now active in 20 African countries and by far the continent’s biggest bank by assets. “We are primarily focused on organic growth in market share, looking particularly at growing with Africa’s emerging entrepreneurs,” says Sim Tshabalala, group chief executive of Standard Bank. “We are also supporting the expansion of African and multinational corporations in Africa. In addition, we are facilitating China-Africa trade and investment with our 20% shareholder, Industrial and Commercial Bank of China.”

Under its Stanbic Bank brand, the company was awarded a full banking license in Ivory Coast last year. It has identified francophone West Africa as a key growth opportunity, due to the economic integration and stability offered by the West African Economic and Monetary Union, whose eight member nations use the CFA franc, which is pegged to the euro.

—Sim Tshabalala, CEO