APAC Japanese banks’ assets drop as China thrives

S&P Global’s 2023 report reflect how lower deposits and a drop in lending has taken their toll on Japanese lenders and other banks in the list. Chinese banks maintained their dominance in the region

Chinese banks continue to reign supreme over Asia Pacific as the region’s largest lenders whilst most of Japan’s biggest banks saw their rankings fall in the 2023 edition of S&P Global Market Intelligence report.

The report reflects how Chinese banks maintained their dominance in the region, solidifying their positions as the largest banks both locally and globally in terms of asset size.

The Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, and Bank of China remained the four biggest banks in Asia Pacific and in the world. Their combined total assets grew 4.1% in 2022, to over US$19.87t.

A total of 23 mainland China banks appeared in the APAC list, with one newcomer: Huishang Bank Corporation, which ranked in the top 50. Not including Huishang

Bank, the total assets of the 22 remaining Chinese banks grew 2.4% to US$35.38t.

Japanese banks’ assets may drop further

Whilst Japan remained the Asian country with the second highest number of banks in the S&P list, and the second highest by combined assets, most of its banks saw their rankings fall in 2022: five lenders fell in ranking, while one bank completely dropped out of the Top 50.

Not including new entrant Nomura Holdings, the combined total assets of seven Japanese banks that appeared in the 2022 list tumbled 8.8% over the year. The Norinchukin Bank had the biggest slump at 18.8%, according to data compiled by S&P Market Intelligence.

The sole exception was Mizuho Financial Group, which climbed one spot to rank the eighth largest bank in APAC by asset size. Nomura Holdings entered the rankings, replacing Fukuoka Financial Group, which dropped out.

Lower central-bank deposits and a slowdown in lending to pandemichit borrowers sapped balance sheets, said S&P analysts Yuzo Yamaguchi and Mohammad Taqi

Japanese banks are not off the hook in 2023 as assets of the lenders are likely to fall again this year, warned Takahide Kiuchi, executive economist at Nomura Research Institute.

This follows after the end of a three-year government-backed COVID-19 loan programme.

The country’s new central bank governor will not do them any favors, either. The Bank of Japan Governor Kazuo Ueda has already signaled that interest rates will remain below zero for longer, S&P said.

Resilient banks

Assets of banks from South Korea and Australia appearing on the S&P list showed moderate growth in 2022. The total assets of the six South Korean banks in the Top 50 grew 1.2% to US$2.69t by end-2022. Movement was mixed amongst the lenders, KB Financial Group and Hana Financial Group, both of which climbed one spot up the rankings. In contrast, NongHyun Financial Group and the Industrial bank of Korea declined. Shinhan Financial Group and Woori Financial Group retained their spots at Nos. 29 and 38 for biggest bank in APAC by asset size, respectively.

S&P also had Australian banks listed with their combined assets rising 0.2% to US$3.15t by the end of the year. Commonwealth Bank of Australia, the country’s largest bank by assets, rose one spot to rank 18th overall in APAC. The National Australia Bank also jumped two places to occupy the 22nd spot, whilst Macquarie Group rose to 45th place.

ANZ Group and Westpac Banking Corporation, meanwhile, fell in rankings, to 23rd and 24th, respectively. S&P Director for Financial Institutions Ratings Nico de Lange expects Australian banks’ credit losses to remain low over the next two years, at 0.15% of total loans.