ABN Amro, ING among top performing European banks
ABN Amro and ING are among the best performing banks in Europe, standing at number 2 and 3 on the "profit as a percentage of equity" ranking. Only the Belgian bank KBC performed better and got the first position, Financieele Dagblad reports.
Analysts and major investors call this ranking the most important financial signal post for banks, according to the newspaper. It shows the earning capacity of a bank. If the return on equity is low, then something is wrong - the bank's operations are not efficient, the bank has high credit losses, the bank is in the wrong markets - or all three.
In 2016 only a handful of European banks managed to show a return of more than 10 percent on equity - the weighted average cost of capital for banks.
Belgian bank KBC is way ahead of its other European counterparts at 18 percent. No other large, internationally active European bank even comes close. According to FD, that is because of KBC's particularly dominant position on the domestic market and in the emerging banking market in Czech Republic. KBC also has a lucrative asset management branch, for which the bank does not have to hold expensive capital.
Dutch banks, on the other hand, lend proportionally more to companies, which is less profitable than private individuals, ABN Amro analyst Cor Kluis explained to FD. Banks in the Netherlands also have more competition than those in Belgium.
Despite this, ABN Amro and ING still scored very well compared to other European banks, each with over 12 percent. ING has been doing well for some time. But ABN Amro only started advancing in recent years.
According to FD, ABN Amro currently consists mostly of a large Dutch mortgage portfolio and a book with Dutch SME loans, complemented by a private bank for wealthy customers and some international businesses. That means that the development of ABN Amro's profits runs almost parallel to the development of the Dutch economy. When the Dutch economy does well, so does ABN Amro. ING, with its geographically more diversified portfolio, is not so dependent on the Dutch economy.
Here follows the ranking of European banks based on profit as a percentage of equity:
- ABN Amro
- ING Bank
- BNP Paribas
- Société Générale
- Credit Agricole
- Credit Suisse
- Deutsche Bank