To understand the true appeal of the world’s international financial centres (IFCs) to the banking sector, The Banker has compiled both a table of locations where lenders’ holding companies are domiciled and one detailing the aggregate assets of foreign-owned subsidiaries present in a certain financial hub.
An analysis of these rankings gives a better understanding of whether the strength of the IFCs comes from the local or the international market and may also give an indication of how attractive their regulatory environment is to foreign players.
Limited progress
The financial hub with the highest asset values for banks domiciled locally is Beijing, with total assets worth $9627bn. The Chinese city, however, is nowhere to be found in the subsidiaries list, signalling that international banks still have limited muscle in the country. On the other hand, it is neighbouring Hong Kong that gathers the highest volumes of foreign-owned subsidiaries’ assets, with a total of $1305bn. The international hub seems to still be the hot spot for the Asian operations of foreign banks.
Tokyo sits in second place in the bank holdings table, with aggregate assets of $8409bn, but is in the bottom half of the foreign-owned subsidiaries table in 14th place. Only London and Paris are present in the top five of both rankings, although with mixed financial results and very low return on assets (ROA) ratios.
The French subsidiaries of international banks closed the latest financial year with an aggregate loss of $3.4bn, while Paris-domiciled lenders managed to close the year in black, with a total $28.2bn profit. When in profit, ROAs for both centres in either ranking are low – something mirrored throughout Europe.
There is a similar situation in New York, where foreign subsidiaries sustained an aggregate loss of $294m and banks headquartered there generated a small 1.01% ROA. The North American centre sits in fifth position in the holdings table and seventh in the subsidiaries ranking.
São Paulo ranks low by assets but displays the highest returns for both bank holdings, with a 2.12% ROA, and foreign-owned subsidiaries at 2.19%. Despite Brazil’s economic slowdown and the related impact on the banking sector, these results indicate that chief executives of international groups ought to keep an eye on activity in the South American country.
