BBL has strongest bank balance sheet in Thailand

In the Asian Banker 500 (AB 500) Strongest Bank Balance Sheets Ranking 2013, the top 500 banks are evaluated to show the quality and sustainability of their balance sheets. The ranking is modelled on a transparent balanced scorecard approach, weighted against six crucial elements, namely scale of operations, balance-sheet growth, risk management, profitability, asset quality, and liquidity. 

Average total capital adequacy ratio of the largest 500 banks reached 14.6 per cent in 2012, up from 14 per cent in 2011, as they prepared to meet new Basel III regulatory capital requirements. The average ratio of non-performing loans (NPL) of the largest 500 banks increased 7 basis points to 2.58 per cent in 2012.

On the 5-point scale, Bangkok Bank’s total score is 3.53.

This year’s top 10 strongest bank balance sheets are represented by players from Greater China and Southeast Asia, including Hong Kong (3), mainland China (3), Macau (1), Singapore (2) and Malaysia (1). 

In the top 10 are Hang Seng Bank (4.19 points), Agricultural Bank of China (4.10), Industrial and Commercial Bank of China (4.10), Hong Kong and Shanghai Banking Corp (4.08), China Construction Bank Corp (4.06), BOC Hong Kong (4.05), Industrial and Commercial Bank of China (4.01), Overseas-Chinese Banking Corp (3.96), Maybank (3.83), and United Overseas Bank (3.78).

“The largest lender in Thailand maintained good asset quality with strong loan loss reserves, and sustained growth in balance sheet and profitability as well as improvement in risk profile,” Foo Boon Ping, managing editor of The Asian Banker.

Increased capital inflows into the region over 2012 helped shore up banks’ capitalisation. Asian markets have been awash with liquidity for the past few years. This has helped kept interest rates low, driven unprecedented credit demand and beefed up banks’ overall capital positions. 

“Banks in the region have benefited from the excess liquidity in the past few years to grow their balance sheets and capitalisation. However, we have observed a slowdown in growth in 2012,” Foo said. The average NPL ratio of the region’s largest 500 banks increased from 2.51 per cent in 2011 to 2.58 per cent in 2012, while the average ratio of loan loss reserve to gross NPL dropped from 246 per cent to 163 per cent.

Overall, Asian banks face the potential of asset quality deterioration in the next two years, reaching a turning point in the current relatively benign credit cycle.

Over the past few years, debt levels in the Asia-Pacific region have increased, mainly because of robust economic growth and a low-interest-rate environment. The significant rise in property prices also poses additional risk to overall financial stability in the region.

Overall, the aggregate strength score has decreased as performance in key parameters such as profitability growth, liquidity and asset quality moderated from the previous year. The average score for all 500 banks declined from 2.53 to 2.49. The highest strength score this year at 4.19 is lower than last year’s 4.31.