The global banking industry has experienced healthy growth in recent years, registering a compound annual growth rate (CAGR) of 4.7% between 2012 and 2016 to reach a value of $134.1 trillion, according to data from research firm MarketLine.
The company’s latest report states that Asia-Pacific continued to be the largest region in terms of asset value, accounting for over 42% of the global total in 2016. Europe followed with over 38%, while the United States remained a large industry influence with 12%.
China once again reigned supreme as the single biggest country market, with over $31.8 trillion of assets. This equated to over 55% of the Asia-Pacific region’s total, demonstrating its importance on a regional and global scale.
Nicholas Wyatt, Project Leader for MarketLine, says: “This is a double-edged sword, as despite China’s slowing domestic growth, it very much remains healthy by global standards. This continues to generate wealth and bring more working and lower-middle class people in to the creditworthy bracket. Wealth management is particularly buoyant due to a culture that places great importance on saving and all of this factors in to our projections of dynamic, double-digit growth through to 2021.”
However, issues with non-performing loans (NPLs) continue to cause concern, with ICBC’s most recent financial report showing that NPL rates continue to rise.
Wyatt continues: “ICBC is not alone. CCB, Agricultural Bank and Bank of China have all announced similar trends and Fitch believes NPL rates in China could be 10 times higher than official numbers suggest, which would make it a ticking time bomb. Typically, this would necessitate tighter credit conditions, but the state’s stake in the banks and desire for economic growth may mean this does not happen as it should and the industry in China continues to grow apace.”
MarketLine also expects the US to drive growth, especially if the Trump administration delivers on its promises with regards to scaling back banking regulation.
“Although this could lead to another financial crisis caused by an overheated industry and bad debt, deregulation looks certain and this should help drive growth, particularly in the areas of consumer and corporate loans,” Wyatt concludes.
– Information based on MarketLine’s report: Global Banks.