11 mainland banks rank in Asia top 20

08:23, December 07, 2010      

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Eleven mainland banks have made it to the top 20 Asian banks, with their profitability improving over the past three years, according to recent Chinese University of Hong Kong (CUHK) report.

The list had the Industrial and Commercial Bank of China as the most competitive bank in Asia, followed by the China Construction Bank at No 3 and the Bank of China at No 4.

The Asia Banks Competitive Ranking Report was the work of the CUHK's Center for Chinese Financial Development and Reform. It collaborated with Peking University, Shanghai Jiaotong University, and the University of Electronic Science and Technology.

"We hold to our definition of a competitive bank as one that keeps a sustainable future and high returns for shareholders," said CUHK's He Jia, main author of the report.

The researchers obviously rejected other definitions of competitiveness, in sticking to this definition and giving shareholders a paramount place.

For example, government bank supervisors might choose to define a competitive bank as one that maximizes safety in its payments and credit system, and responsiveness to monetary and fiscal policy.

A customer might choose to define it as one that pays the highest on deposits, has the lowest interest rates on loans, and has the cheapest, best financial services.

Meanwhile, a bank manager might define it as one with high salaries and benefits and safe, but increasing, career opportunities.

Shareholder return

He Jia defended the team's operation methods by saying, "Our definition does not exclude banks with these attributes, but includes them only if they lead to a maximization of shareholder returns."

The researchers broke competitiveness down into three components: profitability, objective view, and subjective view.

Profitability was measured by the return on shareholders' equity over the last two years. The objective factors were specific to the bank and included size, market share, quality of assests, liquidity, capital, efficiency, depositor base, and branch network.

The subjective factors were obtained through interviews with bankers and investment banks analyst, international bond rating agencies and consulting companies, He explained.

"The report focuses on Asia rather than the entire world because there can be no denying that Asia plays an increasingly important role in the world today."

The majority of Asian countries are back on a growth path in the post-crisis era, compared with the stagnating economies of the United States and Europe. And, emerging regions in Asia are some of the most important destinations for international capital, he added.

Core competitiveness

Zhang Zairong, chief executive officer of the DBS Bank (China) Ltd, said the competitiveness of Asia's banks lies in building relationships of mutual understanding and trust, providing tailored services for customers, and looking for innovation in products, services, and the system.

He's research team compiled their findings on 183 banks in 10 Asian countries and regions, through questionnaires and data from Bankscope Database, Financial Statistics of the International Monetary Fund, and bank websites.

Of the top 20 competitive banks, 11 are on the mainland; three are in Hong Kong; three in Japan; and the remainder in Singapore, India and Malaysia.

Source:China Daily


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