By Maria Tor and Saad Sarfraz
A SNL Financial Exclusive
Banks in China, the United Kingdom, France and Japan comprise the five largest banks in the world, based on assets, but U.S. banks would be included in the mix if adjusted for the netting of derivatives that is not permitted under IFRS, SNL Financial data shows.
Next is the United States, which has 10 of the top 100, followed by Japan with nine banks. The countries in Europe, including Russia, have 47 of the top 100. Africa currently has no banks in the top 100.
Beijing-based Industrial & Commercial Bank of China Ltd. ranked as the largest bank in the world as of Sept. 30, followed by London-based HSBC Holdings Plc and Montrouge, France-based Crédit Agricole Group. The fourth largest bank is Paris-based BNP Paribas SA and the fifth largest is Tokyo-based Mitsubishi UFJ Financial Group Inc.
SNL ranked the banks based on the assets they report under their respective accounting regimes. Industrial & Commercial Bank of China had $3.062 trillion in assets under IFRS, converted into U.S. dollars, as of Sept. 30. New York-based JPMorgan Chase & Co., which reports under U.S. GAAP, had $2.463 trillion in assets as of Sept. 30, making it the sixth largest bank in the world. However, if JPMorgan followed IFRS accounting principles, it would most likely rank as the largest bank in the world, SNL finds. A major difference between IFRS and U.S. GAAP accounting treatments is that IFRS filers must include the gross amount of derivative assets on their balance sheets, while U.S. GAAP filers report the net amount of derivative assets on their balance sheets. SNL calculates that JPMorgan's third-quarter assets would increase by 49% to $3.677 trillion if the offsetting of derivative assets were removed. Charlotte, N.C.-based Bank of America Corp., currently ranked 12th in the world, would likewise move up to No. 2, and New York-based Citigroup Inc., currently ranked 14th in the world, would move up to No. 5. In all, the 10 U.S. banks that rank in the top 100 would add a combined $4.336 trillion in assets if they reported gross derivatives. Additionally, Zurich, Switzerland-based Credit Suisse Group AG and Tokyo-based Nomura Holdings Inc. also report in U.S. GAAP. They would add a combined $896.28 billion to their balance sheets if derivative netting were removed. SNL only made adjustments for banks that primarily report under U.S. GAAP.
The IASB and FASB had proposed in 2011 to remove the differences in offsetting requirements between IFRS and U.S. GAAP, but after receiving comments from the industry, decided to maintain the differing standards and instead require increased disclosures of gross and net positions.
To compile the rankings, SNL ranked the most recently reported consolidated assets of companies classified by SNL as "banks" or "savings banks/thrifts/mutuals," companies regulated in the United States as bank holding companies, or any financial holding company with significant banking subsidiaries. These rankings are not adjusted for subsequent pending or completed acquisitions or divestitures after period-end. Some companies classified by SNL as "banks" were not included in the rankings due to the nature of their business models. The excluded companies were: Frankfurt am Main, Germany-based KfW Bankengruppe, Beijing-based Agricultural Development Bank of China, Washington, D.C.-based International Bank for Reconstruction and Development, Basel, Switzerland-based Bank for International Settlements, Munich, Germany-based FMS Wertmanagement AöR, Chiyoda, Japan-based Japan Finance Organization for Municipalities, Beijing-based Export-Import Bank of China and Seoul, South Korea-based Korea Finance Corp.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.