What is the most profitable bank in the world? Yes, it is the International and Commercial Bank of China (ICBC). The banks is 75% owned by the Chinese government with Goldman Sachs Group Inc. (NYSE GS) owning 4.9%. Net profit last year increased 36% to Rmb 111 billion.
So how did ICBC become number one? US banks take note here. Chinese banks emerged from the financial crisis unscathed. Well, you are probably asking, how did they do this? Did they invest in all kinds of derivatives? No. Did they engage in wild speculation? No. They now did they do it? Well in the end it is very simple, good old fashioned banking. Chinese banks earn 85% of their income from interest. You've got to be kidding, right? No, believe it or not it was interest income. The government sets the deposit rate and banks make its interest on the spread between the deposit rate and their lending rate. Now US bankers would be saying that the Chinese banking system is not sophisticated enough. Meanwhile US bankers are saying: " We've got to have derivatives and play fast and loose in the world markets. Who cares if we bring down the US economy."
Chinese simplicity in its banking methods and ICBC in particular have overtaken JP Morgan Chase and Co. (NYSE JPM) and Citigroup Corp )NYSE C) ICBC has $1.3 trillion in deposits, JP Morgan Chase, $1 trillion and Japan's Mitsubishi UFT Financial Corp $1.2 trillion. ICBC has 3.1 million corporate clients and a customer base of 190 million people.
Do you believe that US bankers should eliminate derivatives and return to good old fashioned banking?
Will Rich Ross really have a positive impact on Disney's movie operations?
Consumers sick of recession, may spend extra on holidays
Corrections, seasonality and Santa Claus
Reader Comments (Page 1 of 1)
4-15-2009 @ 3:36PM
Kent said...
If Congress were to rescind the Banking Law of 1997 allowing our banks to become investment banks, it might do the trick as this article suggests banks avoid. G-20 ought to consider it also.
4-15-2009 @ 4:32PM
clikdawg said...
Again, China is NOT interested in "globalism"; she wishes to maintain her national identity, and puts the interests of her citizens (as interpreted, of course, by the government -- with a certain amount of recent effective input from intellectuals on both the New Right and the New Left) above the current world-wide fast-buck craze.
They are playing a very stodgy, old-fashioned game based on traditional financial verities -- and, like the tortoise in the old story -- look who's making it to the finish line reasonably intact.
Don't mean to push this (last time I'll mention it, in fact) but Euro think-tanker Mark Leonard's "What Does China Think?" is well worth tracking down (I ran across a copy in Albuquerque's Erna Fergusson Library before I knew it even existed) and reading. Quick, easy to grasp, and almost breezy in style, this book is Lesson #1 in understanding tht this is not your father's Red China ...
4-15-2009 @ 7:37PM
william lindblad said...
It is all in what you believe. Enron told us they were doing just fine. Who checks their books? I seem to recall that they did not have any problems with milk, sheetrock, toys, toothpaste - would you like me to keep going?
4-15-2009 @ 8:43PM
clikdawg said...
Well, ya know, Mr. Lindblad, it's like the poet says:
"Believe half of what you see, son --
And none of what you hear."
So I don't.
But I do find a lot of what I hear kinda interestin', amigo ...