Market CapMakes Banks In U.S. Look Stronger

The U.S. banking companies that no longer rank among the world's largest in asset size look a lot stronger in terms of market capitalization.

Based on fiscal yearend stock market valuations-December 1996 for American banks-U.S. institutions hold three of the top 10 places, 10 of the top 25, and 22 of the top 50.

Their world-class capitalizations contrast with their asset status. Only Chase Manhattan Corp. and Citicorp ranked among the world's top 25; they and just three others made the top 50.

"The figures don't surprise me," said Keefe, Bruyette & Woods analyst Hal Schroeder. "Economic growth drives the stock market, and economic growth in the U.S. has been unparalleled."

The strong market capitalizations, he said, have helped U.S. banks maintain their independence.

"The stronger you are, the more likely you are able to participate in bigger lending deals, set up capital markets operations, or invest in new businesses," he added.

"One of the reasons U.S. banks have a bigger market cap than other banks with more assets is that U.S. banks have higher returns on assets," said Richard X. Bove, a banking analyst with Raymond James & Associates, St. Petersburg, Fla.

"A bigger market cap means a bank can raise money at a cheaper price and can make acquisitions at a cheaper price, and that makes it more attractive," he added.

Bank of Tokyo-Mitsubishi Ltd., the biggest bank in the world, with $648 billion of assets, also topped the market capitalization list at $73.8 billion.

Second in market cap was HSBC Holdings, the London-based parent of Hongkong & Shanghai Banking Corp. and several other sizable subsidiaries, at $58.1 billion. But HSBC was ninth in assets, at $405 billion.

HSBC's ratio of market capitalization to assets exceeded Bank of Tokyo- Mitsubishi's by 14.35% to 11.38%. Many U.S. holding companies exceeded those percentages, pushing them up the market cap list.

Wells Fargo & Co., though it recently took a slide, had a 22.7% ratio. It was 15th in market cap, despite ranking 74th in assets.

MBNA Corp.'s market cap - $9.3 billion - was more than half its $17 billion of assets. The credit card specialist, which securitizes many of its loans, was 288th in balance-sheet assets but 48th in market capitalization.

Citicorp was first among U.S. banks and third in the world in market cap, at $43.3 billion. Chase Manhattan Corp., though bigger than Citi in assets, was fifth in capitalization, at $38.5 billion. BankAmerica Corp. was seventh with $35.4 billion.

NationsBank Corp., Wells Fargo, First Union Corp., Banc One Corp., J.P. Morgan & Co., First Chicago Corp., and Norwest Corp., in that order, also made the top 25.

Market capitalization is calculated by multiplying a company's outstanding common shares by their yearend price. The results tabulated in today's American Banker reflect both the U.S. stock market's surge and the value of the dollar against other currencies.

Between the end of 1996 and June 1997, U.S. banks' capitalizations continued to grow. Citicorp's was up to $55.1 billion, and NationsBank and BankAmerica had both passed Chase.

In contrast to some of the more stellar ratios of market valuations to assets-MBNA's 54.43%, Chang Hwa Commercial Bank of Taiwan's 31.75%, and several U.S. superregional companies between 20% and 30%-Societe Generale of France was worst among the top 50 in capitalization at 2.89%.

Atop the global asset table, Bank of Tokyo-Mitsubishi's $648 billion of assets led Deutsche Bank of Germany's $575 billion and Credit Agricole Mutuel of France's $480 billion.

There were few big changes last year in asset rankings. Those that did occur were caused primarily by currency fluctuations or, at some U.S. and U.K. banks, by acquisitions.

Seattle-based Washington Mutual Inc. had the greatest percentage increase in assets-96%-to $44.5 billion, and it climbed from 248th in the world to 139th. CoreStates Financial Corp. of Philadelphia grew 53%, to $45 billion, and National City Corp. of Cleveland rose 41%, to $51 billion.

Banco Central Hispanoamericano of Spain had the biggest drop in assets- 33%-to $61 billion. It was followed by Banca di Roma, with a 31% decline, to $92 billion, and South Korea's Hanil Bank Ltd., which sustained a 27% drop, to $35 billion.

The survey also found that banks worldwide are taking steps to cut costs and improve efficiency.

Bank of Tokyo-Mitsubishi cut its branches by 20%, to 376; Deutsche Bank by 3%, to 2,417; Fuji Bank of Japan by 19%, to 314; and Credit Lyonnais of France by 16%, to 3,525.

The number of employees at the 25 largest banks in the world fell 16%, to 886,856. The aggregate number of branches declined 6%, to 31,439. Citicorp employed the most, at 89,400. Tokyo-based Norinchukin Bank had the smallest staff, 3,000.

Of the top 25 banks, Credit Agricole had the largest branch network, with 8,234 offices. Germany's Westdeutsche Landesbank Girozentrale had the smallest-only 18 branches.

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