HomeList of Strongest Banks
by country in 2012
Methodology and scorecard used
for the evaluation criteria
 

Methodology and scorecard used for the evaluation criteria

One of the most robust assessments of bank strength

The Asian Banker 500 Strongest Banks Ranking is the most comprehensive annual evaluation of the quality and sustainability of the balance sheets of Asian banks for the benefit of investors and counter-parties. The ranking also tells the story of the evolution of the relative strengths of the financial institutions in response to their respective market conditions but measured on a common scale.

Our narrative takes into account the factors outside the balance sheet insofar as they are captured by the changes in the contribution of fees to the balance sheet. But we would admit that it is becoming increasingly difficult to tell an accurate story on this front because of the opaque nature of bank reporting in some markets on this point. We take into account as much as possible in our narrative to ensure that the coverage is as reflective of the realities on the ground.

The model for the Strongest Banks Ranking is based on the balanced scorecard approach, weighted against six crucial factors follows:

  1. Scale of operations (17.5%)—We see that nine out of the ten Strongest Banks are among the largest four banks by assets in their respective countries. However eight of the next ten Strongest Banks are small banks, indicating size is not the one deciding factor for the ranking.
  2. Balance sheet growth (5.0%)—Y-o-Y growth for both loans and deposits has an almost negative correlation with assets size. Within the Top 20 Strongest Banks, small players scored high while their larger peers attained average scores. Both the loan growth and deposit growth sub indicators correlate strongly for most of the 500 banks.
  3. Risk management (25.0%)—The Top 20 Strongest Banks this year ranked very strongly for both the loan to deposit and capital adequacy ratios. Despite Hong Kong and Singapore banks operating in developed markets, the former recorded much lower leverage than the latter.
  4. Profitability (30.0%)—We use a combination of y-o-y growth in operating profit, ROA, cost to income ratio (CIR) and the proportion of non-interest income to measure the sustainability of profitability. Here, the Top 20 Strongest Banks averaged the highest in the CIR subcategory. Chinese banks rank poorly in the diversity of income but record the highest ROA for this year.
  5. Asset quality (15.0%)—All Top 20 Strongest Banks attained extremely high scores for both the loan loss reserve and gross NPL ratio sub-indicators. Among all balanced scorecard indicators, they scored the highest in this area.
  6. Liquidity (5.0%)—Like the asset quality indicator, all Top 20 Strongest Banks achieved an extremely high average of 4.5 for their liquid assets as a proportion of total deposits and borrowings. However, Singapore banks lag behind their strongest peers for this year.
    The Strongest Banks Ranking is not only a recognition of the balance sheet strength of players but offers an opportunity for banks to reflect on the factors that underpin their strengths. The scorecard has been developed and refined over time with the input of bankers and analysts alike to enable it to serve as a benchmark for banks to evaluate their performance on a national and regional basis. 
     



To be part of this prestigious recognition ceremony and for further information, please contact Eunice at efoong@theasianbanker.com

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