Banks in the People’s Republic of China, on the other hand, ranked the most profitable in the region outside of Japan, accounting for 20.11 percent of total wealth.
In a study made by The Asian Banker, the region’s most authoritative provider of strategic business intelligence to the financial services community, Chinese banks have emerged as leaders in terms of contribution to the region’s profit pool.
"Although, the Chinese banking sector was awash with problems ranging from scandals and rumors, massive reforms and huge NPLs, they are the most profitable in Asia," the survey results indicated.
Total net profits for Chinese banks surged 21 percent from the previous year to hit a record high of $11.2 billion, with a ROE (return on equity) of 10 percent. Although one of the lowest in Asia, this is the first time Chinese banks’ ROE exceeded 10 percent.
The Singapore-based publication added that Asian banks achieved a turnaround in terms of profitability, boosted by loan loss provision reduction and cross selling.
"The year 2004 has been largely upbeat for Asian banks. The 300 banks surveyed in The Asian Banker 300 (TAB300) definitive annual ranking of Asia Pacific’s largest and strongest banks, produced $51.5 billion in net profits in 2004 as compared to the net loss of $4.8 billion in 2003," it said.
The ranking in terms of profitability level are China (20.11 percent), Hong Kong (17.8), Australia (17.7), South Korea (11.4), India (8.3), Singapore (5.2), Taiwan (4.6), Malaysia (4.0), Indonesia (3.7), Thailand (3.5), and others, including the Philippines (3.8).
The study also found that 22 smaller banks mostly from Indonesia and India, excluded from the top 100 asset list emerged among the top 50 strongest banks in the region.
The survey also highlights the ongoing consolidation activities to weed out weak players and lay the foundation for stronger financial institutions with better scale and fundamentals to be competitive.
"Sizable, one-off loan-loss provision reductions and cross selling of fee-based products were the main contributors to achieve the turn around," said Emmanuel Daniel, managing director and editor-in-chief of The Asian Banker.
Non-performing loan (NPL) levels decreased in almost every country while rising loan loss reserves and improving asset quality enabled banks to benefit from lower provisions. In fact, it was a key earnings booster for many countries such as Singapore, South Korea, Taiwan and Hong Kong.