In this year’s The Asian Banker Strongest Banks By Balance Sheet evaluation, Bank of China (Hong Kong) retained strongest bank ranking in Asia Pacific despite the lowest score in five years. The bank excelled in the areas of scale, risk profile, asset quality and liquidity. The strongest bank in Australia, China, Hong Kong, Japan, Macau, Malaysia, Singapore, South Korea, Taiwan, Thailand and Vietnam ranked among the top 30 strongest banks in Asia Pacific. This is based on a detailed and transparent scorecard that evaluates commercial banks and financial holding companies (banks) on six areas of balance sheet financial performance, namely the ability to scale, balance sheet growth, risk profile, profitability, asset quality and liquidity.

Overall, the weighted average strength scores of Hong Kong and Singapore banks remained the highest in the region in this year’s AB500 Strongest Banks evaluation, at 3.84 and 3.66 out of 5 respectively. Meanwhile, banks in Thailand, China, South Korea and Malaysia also achieved higher strength scores than the average of the 500 largest banks in Asia Pacific, at 3.24 out of 5.

The average gross non-performing loan (NPL) ratio rose only moderately to 1.62% from 1.53%, as the COVID-related relief measures have led to the deferred recognition of problem loans. Banks in Indonesia and the Philippines saw average gross NPL ratio deteriorate the most in 2020. On average, banks in South Korea, Macau, Australia, Taiwan and Hong Kong achieved the highest score in asset quality, while banks in Sri Lanka, Bangladesh, Brunei and India underperformed. The asset quality of the Indian banking sector improved slightly, with average gross NPL ratio of Indian banks on the AB500 list down to 7.5% at the end of March 2021, from 7.9% a year ago.

Banks in Australia, Bangladesh, Japan and South Korea achieved the lowest average score in profitability. On the contrary, banks in Cambodia, Kazakhstan, Macau, Pakistan, the Philippines and Vietnam had a good showing in profitability. The overall profitability of the Asia Pacific banking sector weakened in 2020, primarily due to the compressed net interest margins and the rise in loan loss provisions. On average, the return on assets (ROA) of banks on the AB500 list was down from 0.73% in 2019 to 0.64% in 2020. Banks in Indonesia, Malaysia, the Philippines and Thailand recorded the biggest drop in ROA. Average ROA of Indian banks reached 0.67%, increasing from 0.29% in the previous year, bolstered by trading profits on bond portfolios that banks booked after the cut in policy rates, along with lower credit provisions.

Most banks maintained solid capital and liquidity positions despite the pandemic. The average capital adequacy ratio (CAR) of banks in Indonesia, Hong Kong, Malaysia, Pakistan and Thailand were above 18%, while CAR in Vietnam and Bangladesh were considerably lower than that in other markets. Overall, banks in Brunei, Hong Kong, Japan, Kazakhstan and Pakistan remained highly liquid, as evidenced by the liquid assets to total deposits and borrowing ratio of over 50%. Banks in the Philippines, Pakistan and Bangladesh recorded improvements in liquidity, while banks in Sri Lanka had the lowest liquid assets to total deposits and borrowing ratio at 14%.

For a full explanation of the evaluation criteria please click here.

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