"U.S. banks have grabbed 15 of the top 25 slots in profitability among the biggest banks worldwide, according to a study released Monday by IBCA Inc., the international rating agency. U.S.The study said the top four big banks in "real profitability," ranking seventh to 10th in the worldwide tally, are First Interstate Bancorp., Banc One Corp., First Chicago Corp., and Wachovia Corp.
The survey, conducted among the world's 300 biggest banks, calculates "real profitability" by adjusting reported return on equity ratios for differences in bank capitalization and variations in inflation and tax rates in different countries for 1993.
Other U.S. banks among the world's most profitable are PNC Corp., ranking 11th, Norwest Corp., at 13th, Corestates Financial Corp., 14th, and National City Corp., 15th.
The performance of U.S. banks contrasts sharply with their rankings barely two years ago, when U.S. banks occupied eight of the bottom 20 positions.
"The return to health of the U.S. banking system is underlined by the fact that U.S. banks occupy four of the top 10 places," IBCA noted.
Mark Gross, a banking analyst with IBCA in New York, said that one of the main reasons U.S. banks are doing well is that they aggressively dealt with their asset quality problems in 1991 and 1992. The subsequent decline in interest rates also helped boost profit margins.
"Provisions are down, asset quality is good and the interest rate environment has been favorable to U.S. banks for two and a half years," Mr. Gross pointed out.
He added that cost cutting, mergers among banks, and a reduction in excess capacities were also major factors contributing to improving profitability among U.S. banks.
Recent increases in interest rates since the start of the year have so far failed to make a dent in U.S. banks' profitability, he observed.
"Margins are at record highs and starting to come under some pressure but still look good," Mr. Gross said.
The agency also noted U.S. banks account for more than half of the top ranking banks worldwide. The lowest ranking U.S. bank was Bank of Boston, which occupied 661h position.
The agency added that based on results so far this year, "U.S. banks are likely to do at least as well in the rankings for 1994."
The top-ranking bank worldwide in profitability was Hang Seng Bank, a 60%-owned subsidiary of Hong Kong and Shanghai Banking Corp,
Next came Spain's Banco Popular Espanol, Bankgkok Bank, China's Bank of Communications, Singapore's United Overseas Bank and Banco Nacional de Mexico.
In terms of absolute dollars and cents, HSBC Holdings, parent company of Hong Kong and Shanghai Banking Corp., Midland Bank and Marine Midland Banks, Inc., had the most cash with $3,065 billion in profits last year. Citicorp ranked second in absolute net profits with $2.2 billion followed by Bank of China.
British banks showed improving profitability after four bad years while Spanish banks continued to show strong returns.
The survey, which also ranks banks by size of assets, equity and net income, noted Japanese banks "continue to edge out all competition for the top 10 banks by asset size."
Only two banks, France's Credit Lyonnais and Industrial and Commercial Bank of China came close to the Japanese banks in size. They ranked 9th and 10th, respectively, according to assets. But both banks were in the bottom 25 in terms of profitability.
In contrast to the strong showing by U.S. banks, IBCA said Japanese banks are reporting "miserable returns" and face another difficult year in 1995.
Italian, German, French, and Scandinavian banks all posted poor results, with Italian banks faring the worst.
"In Italy, the banks face the worst of all worlds, where an unstable political system is combined with an antiquated banking structure," IBCA noted.
Union Bank of Finland, Banco do Brasil, Banco do Estado de Sao Paolo and Banco Espanol de Credit had the dubious distinction of being the world's worst performing banks last year.