The banking industry has demonstrated significant resilience in 2023, remaining steadfast in the face of potential crises. Despite the looming threat of multiple bank failures in the US and Europe, swift intervention averted a potential financial crisis driven by contagion. This served as a wake-up call for the entire industry, particularly for neobank challengers, shedding light on the inherent risks of app-based banking and the potential for rapid mass deposit withdrawals leading to bank collapse.
In response to the revealed risks, bank CEOs placed a major emphasis on boosting the current account savings account ratio and enhancing deposit “stickiness.” The net interest margin (NIM) environment remained optimal, yielding a positive return on equity for the first time in 15 years, averaging 9% last year. The Asia-Pacific region experienced significant growth in bank profits, even in Japan, which had been grappling with negative interest rates for 12 years.
The industry as a whole achieved enhanced cost efficiency and asset quality, with a greater focus on reducing cost-to-income (CTI) ratios. However, there was a global reduction of 60,000 jobs and a decline in investment banking fee wallets. Furthermore, traditional bank lending faced competition from a flourishing private credit market engineered by the nonbank financial sector.
Environmental, social, and governance (ESG) considerations continued to be a major theme, with stricter regulatory measures in Europe and a push for sustainability in Asia. Sustainable finance dominated the global financing spectrum, with a focus on transition format in Japan and full-scale green/impact issuance in Europe, the US, and Asia-Pacific.
European banks experienced record profits in 2023, thanks to the NIM effect, resilient asset quality, and low CTI ratios. Additionally, the Bank for International Settlements reported that more capital was returned to bank shareholders last year than at any other time since the global financial crisis.
Global Finance editors determine the winners of the Best Bank awards through independent research and insights from industry analysts, corporate executives, and technology experts. Criteria for evaluation include knowledge of local conditions and customers, financial strength and safety, strategic relationships, capital investment, and innovation in products and services. It is essential to note that entrants may provide details that are not publicly available, influencing their chances of success.
Finalists are chosen based on an algorithm that considers various factors, such as global coverage, customer service, risk management, range of products and services, and strategic use of technology. In the event of a tie, local providers are given preference over global institutions, and privately owned banks are favored over government-owned institutions. The winning banks are those that best cater to the specialized needs of corporations engaging in global business.
The banking industry’s performance in 2023 has been truly remarkable, and it is evident that the top banks of 2024 will have significant expectations to meet. With a continued focus on sustainability, innovation, and customer service, the future of banking appears promising.