Chinese banks lead APAC counterparts in Q2 capital and liquidity ratio improvement

According to data compiled by S&P Global Market Intelligence, major banks in mainland China have overtaken their Asia-Pacific counterparts in reporting year-over-year improvements in key Basel capital, liquidity and leverage ratios. III during the quarter ended June 30.

Most of the mainland Chinese banks covered by the sample have published year-over-year increases in their fully loaded Common Equity Tier 1 capital ratios in the June quarter, with Chongqing Rural Commercial Bank Co. Ltd. and Bank of China Ltd. led the pack with increases of 83 basis points and 53 basis points, respectively.

Meanwhile, Oversea-Chinese Banking Corp. ltd. of Singapore and Bank of Tianjin Co. Ltd. of China recorded the largest declines in their CET1 ratios at 113 bps and 103 bps, respectively.

The two Japanese banks that are on the list — Shizuoka Bank Ltd. and Chiba Bank Ltd. — reported declines in their TEC1 reports.

The sample included Asia-Pacific banks covered by Market Intelligence that reported fully loaded CET1 ratios for the periods assessed and had assets greater than $100 billion as of June 30.

Banks around the world are acting cautiously, maintaining strong capital buffers and managing prudent leverage, as they face slowing global economic growth due to rising inflation and geopolitical risks. Led by the US Federal Reserve, most global central banks tightened monetary policy to counter soaring energy and commodity prices after Russia invaded Ukraine in February.

Earlier monetary easing during the COVID-19 pandemic, when most central banks stepped up support for their economies in 2020 and 2021 by releasing liquidity, allowed lenders to strengthen their capital buffers and reduce risk. risk exposure.

Leverage ratio

Most major Asia-Pacific banks saw year-over-year improvements in their Basel III leverage ratios in the June quarter, again with mainland China banks leading the pack. Out of a sample of 61 banks, 43 reported a negative change in their ratios, while 17 showed an improvement. KB Financial’s ratio in South Korea remained stable year-on-year. The leverage ratio measures CET1 and additional Tier 1 capital as a percentage of total leverage exposure.

Japanese bank Norinchukin and Chinese bank Zhongyuan Bank Co. Ltd. experienced the largest declines in the quarter, with their ratios falling 200 basis points and 139 basis points. basis points, respectively. However, Norinchukin Bank also had the sixth highest debt ratio at the end of the quarter, at 8.48%, behind Axis Bank Ltd., The Bank of East Asia Ltd., HDFC Bank Ltd., PT Bank Mandiri (Persero) Tbk and PT Bank Rakyat. Indonesia (Persero) Tbk.

Bank Rakyat Indonesia, which topped the list with a leverage ratio of 16.75% as of June 30, and South Korea’s Hana Financial Group Inc. reported the largest increases in their ratios, at 360 basis points and 214 basis points. basis points, respectively. Japan’s Mizuho Financial Group Inc. and India’s Punjab National Bank reported the lowest leverage ratios at 4.22% and 4.60%, respectively, as of June 30.

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Liquidity coverage ratio

Almost all Japanese banks included in the sample saw a year-on-year decline in their liquidity coverage ratios in the quarter ended June 30, with Norinchukin Bank reporting a drop of 135 points percentage of its ratio at 253.74%, according to Market Intelligence Data. Japan’s Bank Rakyat Indonesia and Sumitomo Mitsui Trust Holdings Inc. posted declines of 50 percentage points and 43 percentage points, respectively, in the quarter.

In the recorded sample, 20 of 29 mainland Chinese banks saw year-on-year increases in their liquidity coverage ratios, led by Bank of Nanjing Co. Ltd. with an increase of 170 percentage points. Six Indian banks also appeared on the list, with three log increases and decreases each.

The liquidity coverage ratio measures banks’ ability to withstand large cash outflows and is calculated by dividing a bank’s high-quality liquid assets by total net cash outflows over 30 calendar days. Basel III rules require banks to hold a minimum short-term liquidity ratio of 100%.

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Sallie R. Loera