Neville, Laurence

Global Finance unveils its annual list of the best banks in developed markets around the world.

There are barely enough superlatives in the dictionary to describe the financial performance of the world's best developed market banks. These global powerhouses are enjoying a period of sustained profit increases that are so dramatic that perhaps the only cloud on their horizon is the possibility of a public backlash against their remarkable ability to make mind-boggling sums of money. Assuming they do not become victims of their own success, the banks listed on the following pages will almost certainly continue to dominate the world financial scene for years to come.

All selections were made by the editors of Global Finance after extensive consultations with bankers, corporate financial executives and analysts throughout the world. We considered a range of objective factors, including growth in assets, profitability, geographic reach, strategic relationships, new business development and innovation in products. Subjective criteria included the opinions of equity analysts, credit rating analysts, banking consultants and others involved in the industry. The mix of these factors yields leading banks that may not be the largest, the oldest or the most diversified in a given country, but rather the best-the banks with which corporations around the world would most likely want to do business.

BERMUDA

BUTTERFIELD BANK

Since its creation nearly 150 years ago as Bermuda's first bank, this financial institution has played an important role in the island's economy. Today its operations extend to the Bahamas, Barbados, the United Kingdom and Switzerland. Analysts laud its strong retail banking activities, such as mortgage lending, as well as its corporate services-which range from corporate finance to cash management-for corporate clients of all sizes. And as a specialist offshore financial services group, the bank provides private banking, asset management and fiduciary services from its headquarters in Bermuda as well as subsidiary offices in the Bahamas, the Cayman Islands, Guernsey, Switzerland and the UK. The bank attributes its success to sound corporate values that keep a tight focus on boosting profits by expanding the client base as the bank deepens customer relationships by smoothly delivering the right products at a fair price. With a workforce of more than 1,700 employees around the world, the bank managed to produce a 22.6% jump in net income to $134.1 million last year. Total operating revenue increased by nearly 17%, or $59.9 million, to $415.1 million for the same period. At the same time, the strong growth in customer deposits helped boost assets to $11.1 billion, up from $9.2 billion a year ago.

Alan R. Thompson, president and CEO

www.butterfieldbank.com

CANADA

ROYAL BANK OF CANADA (RBC)

With more than 138 years under its belt, this Canadian bank keeps ahead of its competitors by successfully deploying a strong distribution network for a variety of retail products and offering corporate clients a full array of services. Its corporate and investment banking unit, RBC Capital Markets, contributed approximately 30%, or $1.2 billion, to the group's earnings last year as it uses the experience of nearly 3,700 employees in 75 offices in more than a dozen countries. Analysts expect the unit to grow as its managers quietly build the investment banking business at a time when most other Canadian banks are retreating from this line of business. Backed by the parent company's $400 billion in assets, RBC Capital Markets is known in the United States and Europe for successfully filling a niche-for example, municipal underwriting-while at home it serves as a full-service corporate bank and offers everything from innovative credit solutions to foreign exchange. The bank prides itself on measured growth in all business lines, and in early February it shifted its successful asset management business, along with some other operating lines, into a new wealth management unit. For the fiscal year that ended November 30, 2006, RBC reported an 8% increase in revenue from continuing operations to $18.2 billion, reflecting strong growth across most business lines. Net income from continuing operations for the same period jumped nearly 40% to $4.2 billion, up from $2.8 billion in 2005.

Gordon M. Nixon, president and CEO

www.rbc.cotn

UNITED STATES

CITI

Already a global powerhouse, with 300,000 employees working in more than 100 countries, Citi has plans to push ahead on the international front and eventually boost the portion of revenues gleaned from global business accounts to 60%. That's up from the more than 40% share that international operations contributed last year to the bank's 2006 revenues of $89.6 billion-itself a jump of 7% over the preceding year. While analysts are still waiting for chief executive Charles Prince, who took the reins as CEO in 2003 and was named chairman last year, to hone his management skills, they give him strong marks for helping Citi emerge from the controversial regulatory entanglements that tainted its image and snagged its stock price. These included the shareholder suits surrounding financial scandals at Enron and WorldCom and the tangle with Japanese authorities over Citi's private banking unit. The latest controversy that made investors skittish was the decision to shift chief financial officer Sallie Krawcheck over to Citi's global wealthmanagement business after its chief, Todd Thomson, quit abruptly. Yet while other major banks may be better managed right now, Citi is hard to beat for its size and sheer reach around the globe, from Argentina to Zambia. Its corporate and investment banking unit-which kicked in $27.2 billion of the company's revenue last year and a third of its $21.5 billion in net income-is known for providing corporations around the world with tailored financial solutions in everything from restructuring to foreign currency to debt.

Charles Prince, chairman and CEO

www.citigroup.com

AUSTRIA

RAIFFEISEN ZENTRALBANK

The RZB Group, headed by Vienna-based Raiffeisen Zentralbank Österreich, is a powerhouse in central and eastern Europe. In the first three quarters of 2006, Raiffeisen International Bank achieved another record result with consolidated profit of euro539 million. The bank's balance sheet total surpassed euro50 billion for the first time-following a 24% increase-and its profitability improved further with a return on equity (ROE) before tax of 26.5% and a cost/income ratio of 56.9%. Significantly, RZB is performing strongest in the market in which it has concentrated its resources. The Commonwealth of Independent States (CIS) is the region with the strongest growth for the bank and the largest earnings increases, thanks partly to acquisitions. Profit before tax rose there by euro220 million to euro316 million, with the one-off effect of selling the stake held in Bank TuranAlem contributing euro102 million to that growth. The region's share in total profit advanced significantly from 23% to 42%, or 33% excluding the one-off effect.

Walter Rothensteiner, chairman

www.rzb.at

BELGIUM

FORTIS

Buoyant customer activity led to a 19% growth in profit for Fortis during the first nine months of 2006, with the banking division performing well: Net profit increased 25% to euro2.64 billion while total income was up 15% to euro7.87 billion-almost entirely due to strong growth of net interest and commission income. At the same time, the bank's cost/income ratio remained stable at 57.8%, and it enjoyed continued low impairments on loans, with a credit/loss ratio at four basis points. Commercial momentum in the third quarter was sustained due to robust customer activity: Underlying lending volumes were up 7% quarter-on-quarter and 18% year-on-year. In addition, net inflow in funds under management was euro5.9 billion in the third quarter.

Jean-Paul Votron, CEO

www.fortis.com

CYPRUS

BANK OF CYPRUS

The Bank of Cyprus has experienced an exceptional period of development of its operations and a dramatic improvement in its performance and profitability during the two years to December 2006. Its total operating income increased from euro633 million in 2004 to euro918 million in 2006 while its cost-to-income ratio improved from 62.3% to 46.7%, with total operating expenses increasing by only 4% a year. The result of this strong performance and increased efficiency was a remarkable fourfold growth in profit after tax from euro67 million to euro317 million while ROE increased sharply to 21.7% from 7.1%. In Greece, the bank increased business volumes at rates higher than the market and gained a large number of new clients. Meanwhile, it has built on its established client relationships in eastern European countries and has pledged to establish Cyprus as an international financial center for businesses from Russia and other countries of eastern Europe.

Andreas Eliades, CEO

www.bankofcyprus.com

DENMARK

DANSKE BANK

Danske Bank enjoyed a spectacular year in 2006. Not only did it successfully integrate its newly purchased operations in Northern Ireland and the Republic of Ireland, but it ended the year buying Finland's Sampo Bank. The bank says that it will spend 2007 focusing on its core markets of Finland, Estonia, Latvia and Lithuania. Against this backdrop of unprecedented change, Danske Bank has continued to grow profitably: The group made a net profit of DKr13.55 billion ($2.4 billion) compared to DKr12.64 billon in 2005. Income rose by 8% over 2006 while the bank's cost/income ratio improved from 52.4% in 2005 to 52%. Bank loans and advances rose an impressive 23% while lending to retail customers increased by 16% and lending to corporate customers rose by 26%. For shareholders the news was good: Dividends were increased, and Danske Bank now pays out a dividend equal to 40% of the net profit of the group.

Peter Straarup, CEO

www.danskebank.com

FINLAND

OKO BANK

In 2006 the OP Bank Group, of which OKO Bank is the universal commercial bank and the main bank, reported the best annual earnings in its history. Earnings before tax grew by 38% to euro800 million, while both income and expenses increased by 37%. Of income items, net interest income was up 11%, and other income rose by 69%. At the same time, the OP Bank Group's market position continued strengthening. Market share gains were registered within loans, deposits, and life and pension insurance, while cross-selling of bank and insurance services was strong. Meanwhile, the bank continued to have a strong risk-bearing capacity and a stable risk exposure: Its funds were 1.6 times the statutory minimum while non-performing receivables declined to a historically low level, or 0.3% of the loan and guarantee portfolio. With the integration of Finnish insurer Pohjola going smoothly, 2007 looks set to be a strong year for the bank.

Mikael Silvennoinen, president and CEO

www.op.fi

FRANCE

SOCIÉTÉ GÉNÉRALE

In the fourth quarter of 2006, Société Générale maintained its trend of profitable growth recorded in the first nine months of the year. Growth was driven by improvements in all business lines and reflected the soundness of the strategy implemented since 1999, combining strong organic growth and focused, value-creating acquisitions. By the end of December 2006, the group had 22.5 million individual customers in its retail banking and financial services networks, an increase of 2.4 times in seven years; euro422 billion in assets under management, an increase of 2.8 times in seven years; and almost 120,000 employees in 77 countries. Retail banking outside France is one of the group's main growth drivers, combining acquisitions in targeted geographical regions (central and eastern Europe, Mediterranean basin) and stepped-up organic growth in areas where the group has a presence. The bank has also been acquisitive, not least in Russia, where it bought a 20% stake in Rosbank, the second-largest Russian retail banking network. The upshot of this focus was a 15.7% increase in organic revenues compared to 2005 against a backdrop of a low cost/income ratio of 61.1%. Shareholders have benefited handsomely: Société Générale raised its dividend by 16.3%.

Daniel Bouton, chairman and CEO

www.socgen.cotn

GERMANY

DEUTSCHE BANK

The Deutsche Bank powerhouse continues to grow at an exceptional pace. Unaudited figures for the fourth-quarter and full-year 2006 show income before income taxes was euro8.1 billion for the year, up 33% compared to euro6.1 billion in 2005. Net income for the year was euro6 billion, up a staggering 70% compared to 2005. Fourth-quarter figures were even more impressive: Income before income taxes was up 81% while net income was up 272%. Every division of Deutsche Bank-from corporate and investment banking to private banking and asset management-appears to be firing on all cylinders. Moreover, Deutsche Bank looks well positioned to take advantage of growth in all its main markets. Shareholders benefited from a 60% increase in the dividend.

Josef Ackermann, chairman

www.deutsche-bank.de

GREECE

EFG EUROBANK

EFG Eurobank has expanded its pres?ence in three new countries in central and southeast Europe and achieved strong business growth in Greece and other countries in what it describes as "New Europe." By the end of 2006, the group had established a strong footprint with a network of more than 1,300 branches. Eurobank EFG successfully established Polbank EFG in Poland, entered the Turkish banking market through Tekfenbank and entered the Ukrainian market through Universal Bank. More important, Eurobank EFG has performed stunningly: Consolidated net profit increased by 28.6% to euro644.5 million against a target of euro615 million. Lending volume rose 27.4% year-on-year. As a result of the bank's increased profitability, the dividend was increased by 23%-coincidently the same figure as the bank's impressive ROE.

Nicholas Nanopoulos, CEO

Mrww.eurobank.gr

ICELAND

GLITNIR

Iceland's banks had a tough time in 2006-at least reputationally-following investor concerns about the stability of the country's economy during the first quarter. Glitnir's figures for 2006 silenced the critics: After-tax profit for the fourth quarter was ISK9.3 billion ($140 million) compared to ISK8.8 billion in Q3 2006 while after-tax profit was ISK38.2 billion in 2006 compared to ISK18.9 billion in 2005-a 102% increase. Pre-tax profit for the full year was ISK46.3 billion compared to ISK23.1 billion in 2005. Crucially, during 2006 45% of the bank's pre-tax profit was generated outside Iceland, or ISK20.7 billion of ISK46.3 billion. Almost every aspect of the bank's performance improved dramatically in 2006: Fees and commissions increased by 202% from 2005 to 2006 while after-tax return on equity in 2006 was 39.4%, compared to 30% in 2005. Total assets grew an impressive 53% over the year.

Bjarni Ármannsson, CEO

www.glitnir.is

IRELAND

AIB

Allied Irish Bank's strong results for the first six months of 2006-the most recent figures released-reflect vigorous, well-spread growth in all its markets and the development of high-quality franchises. While exceptionally good asset quality complemented the first-half results, the strong operating performance and customer demand underpins confidence in the future growth and resilience of the bank's business. ROE at the Irish banking division was up 19% on the same period a year earlier while pre-tax profit of the capital markets division was up 58%. Pre-tax profit at the bank's UK operations increased 18% while its Polish operations' pre-tax profit grew 62%. The bank's cost/income ratio was down 2.7% to 52.4%.

Eugene Sheehy, CEO

www.aib.ie

ITALY

UNICREDIT

UniCredit has now fully integrated with the HVB Group-the crucial CAIB International Markets franchise was consolidated into the new entity by the first quarter of 2006-and the bank is already benefiting. In the first three quarters of 2006-the most recent results published-net income was up 44.7% with net income for the third quarter alone up 37.8% year-on-year. Revenue also increased by 4.6% in the quarter over the preceding year and an impressive 11.9% in the first nine months of the year compared to the same period a year earlier. At the same time, UniCredit has kept its costs in check: They rose just 0.7% in the quarter compared to the previous year and 1.5% for the first three quarters. Combined with an 8.1% reduction in impaired loans, UniCredit unsurprisingly turned in a strong return on riskadjusted capital of 8.9% and a return on allocated capital more than double the cost of equity.

Alessandro Profumo, managing director and CEO

www.unicreditgroup.eu

LUXEMBOURG

FORTIS BANQUE LUXEMBOURG

Fortis delivered a strong performance for the first nine months of 2006. Before divestments, the bank already outpaced its full-year results for 2005. Impressive 18% underlying loan growth, which compares favorably with the strong 15% growth in 2005, helped to drive revenues from banking operations, which increased 15% to euro7.9 billion. In the first nine months of 2006, net new inflow in funds under management totaled euro13.7 billion, with sharp growth in the third quarter. In order to continue and boost this strong performance, Fortis recently decided to recalibrate its organization to reflect shifting business dynamics. Although details will not be released until full-year results are announced, the aim is to focus on new solutions that offer higher revenues and make better use of resources.

NETHERLANDS

ABN AMRO

ABN AMRO has pursued a focused strategy that ruthlessly exploits the bank's strengths and sensibly stays out of markets where it might be an also-ran. The results continue to be impressive: Full-year operating profit was up 14.5%, and revenue growth was 19.6%, driven by the integration of Italian bank Antonveneta and organic growth in all regions. Meanwhile, the whole operation was underpinned by a strong performance by ABN AMRO's global markets division. ROE in 2006 was 20.7%, above the bank's target of 20%. A strict capital management regime allowed an increased dividend for 2006 and a new euro1 billion share buy-back program to take place during the first half of 2007. The bank's tier-1 ratio improved to 8.45%.

Rijkman Groenink, chairman of the managing board

www.abnamro.com

NORWAY

DNB NOR

DnB NOR enjoyed a strong 2006, with pre-tax operating profits before write-downs up 12.8%. All of the group's business areas experienced sound growth during the year, and despite intense competition and pressure on spreads, the group's income rose by 12.5% from 2005. Growth in lending was 18.7% in 2006 while corporate lending growth averaged 26.2% and household lending increased by 11.3%. The bank reduced lending spreads in the retail market by 0.33 percentage points in the course of 2006, whereas there was an increase in deposit spreads. Narrowing spreads in the corporate market were counteracted by strong growth in volumes. Non-performing commitments and writedowns on loans were historically low. The bank has also kept up the pressure on expenses, and although they increased by 12.2%, that was still a lower figure than income growth. The rise in costs reflects investments in new international operations, increased product development and investments in new IT systems, which should all yield improved performance in the future. DnB NOR s cost-to-income ratio was 50.1% for the year, a hair lower than the 50.2% achieved in 2005.The bank is on course to attain its sub-50% goal in coming years.

Rune Bjerke, CEO

www.dnbnor.com

PORTUGAL

MILLENNIUM BCP

The Portuguese market is intensely competitive, and the title of best bank was closely fought between Santander Totta, Banca Espirito Santo and this year's winner Millennium bcp, which enjoyed a strong financial performance in 2006 with recurrent net income up by 28% and earnings per share up 26%. Millennium bcp's focus on Portugal-it has a 25% average domestic market share in retail banking, private banking and asset management, commercial banking, and corporate and investment banking-has proved to be the right strategy for the bank. However, while 84.8% of total assets and 89.5% of recurrent earnings come from Portugal, Millennium bcp has cannily got exposure to growth markets in Greece and Poland, where recurrent net income grew 51% on 2005.

Paulo Jorge de Assunção Rodrigues Teixeira Pinto, chairman

www.millenniumbcp.pt

SPAIN

SANTANDER

Santander has undeniably transformed itself into a world-class bank in less than a decade, and it shows no sign of slowing its growth. In 2006, attributable profit, excluding capital gains, rose 26% to euro6.58 billion while earnings per share also rose 26%, allowing the dividend to be increased by 25%. The increase in profit was driven by growth in revenues of 17%-more than twice the rate of growth in costs of 7%-leading to an improvement in efficiency of more than four percentage points to 48.5%. Growth in revenues at the bank was supported by strong activity in all businesses, in Europe as well as in Latin America. Loans grew by 20% and customers' funds by 9%. In continental Europe, profit grew by 16% to euro3.47 billion, owing to growth in loans of 29% and in customer funds of 16%. In Latin America, attributable profit increased by 29% to euro2.29 billion, with growth of 22% in loans and 25% in customer funds, measured in local currency. Santander's UK operation Abbey increased profit by 24% to euro1 billion, with growth of 9% in loans and 2% in deposits in sterling.

Alfredo Sáenz Abad, second vice chairman and CEO

www.santander.com

SWEDEN

SEB

Building on the strong economic climate with high financial market activities and business volumes, SEB over the past year achieved its best results so far. Its efforts to improve productivity and establish a more competitive long-term cost base are gradually yielding results. In last year's buoyant business climate, revenues were up by 13%, while costs increased by 2%. Return on equity reached 20.8%. The bank's operating profit for the full-year 2006 increased by 39%, while net profit improved by 50%. Strong markets and intensified customer activities led to higher operating profits in all divisions. Profit growth was particularly strong within merchant banking, eastern European banking, and life, with operating results increasing by 40% to 65%. The bank has narrowed its strategy to a full universal banking offering in Sweden, the Baltic countries and Germany and a more focused offering in other markets.

Annika Falkengren, president and CEO

www.sebgroup.com

SWITZERLAND

UBS

One of the titans of global banking, UBS did not put a foot wrong in 2006, with its financial businesses' attributable profit from continuing operations at a record Sfr 11.25 billion ($9.23 billion)-up 19% from 2005-the fourth consecutive record year for the businesses. Shareholders enjoyed a 20% increase in earning per share, and while they should be wary of the growth in UBS's cost base-costs rose 19% against an increase in income of 18%-the bank is in the process of expanding its business, which should help it continue to grow revenue in coming years.

Peter Wuffli, CEO

www.ubs.com

UNITED KINGDOM

BARCLAYS

Barclays enjoyed a strong 2006: Barclays Capital, Barclays Global Investors and the UK retail banking operations performed well despite intense competition. South Africa's Absa, long the hope for growth in the group, in its first full year of results outperformed the business plan put in place when the acquisition occurred. Barclays' income increased by 35% to £21.59 billion while profit before tax grew 35% to £7.14 billion. The bank's income growth of 25% was well ahead of expense growth of 20% despite the significant investment in organic growth across the business and performance-related costs.

John Varley, CEO

www.barclays.com

AUSTRALIA

COMMONWEALTH BANK OF AUSTRALIA

All of the Australian banks performed well in the past year, with double-digit profit growth in most cases, but Commonwealth Bank of Australia (CBA) had a spectacular year, with record net profit of A$3.1 billion (US$2.4 billion)-up 14%. All of the group's businesses made contributions to the performance, and the bank's focus on its strategic priorities proved to be successful: ROE, on a cash basis, increased 60 basis points to 22.3%, the bank maintained its high credit quality, it offered investors a record interim dividend, and it declared that it was on track to deliver full-year earnings-per-share growth that meets or exceeds the average of peers.

Ralph Norris, managing director and CEO

www.conunbank.cotn.au

HONG KONG

HSBC

In the most recent figures available, for the first half of 2006, HSBC achieved strong revenue growth, and there is no expectation that the full year will not yield similar results. HSBC's combination of well-positioned and profitable business in developed markets and leadership positioning in emerging markets-not least China-continues to delight shareholders. Profit attributable to shareholders for the first half of 2006 rose by 15% to $8.7 billion-a new high-and represented earnings per share of $0.78, a rise of 13%. Income in the first half grew by $4.5 billion while costs grew by just $1.7 billion-and, as the bank has already completed its planned major investments in corporate, investment banking and markets strategy, further improvements are expected. Net operating income growth compared with the first half of 2005 was 14% while the bank's cost-efficiency ratio improved to 50.1%.

Michael Geoghegan, CEO

www.hsbc.com

ISRAEL

BANK HAPOALIM

Although Bank Hapoalim's third-quarter results for 2006-the most recent available-were overshadowed by the war in Lebanon, the bank remained strong, as did the Israeli economy. Net profit in the first nine months increased 14.8% compared to the same period of 2005. Net return on equity for the first nine months of 2006 was 22% in annual terms, compared to 20.5% for the same period in 2005. Meanwhile, net return of operating profit on equity, after taxes, for the first nine months of 2006 was 15.5% in annual terms compared to 15% in the same period in 2005. At the same time, the bank remains solid as a rock: Its ratio of tier-1 capital to risk assets increased to 7.37%, versus 7.02% at the end of 2005.

Zvi Ziv, president and CEO

www.bankhapoalim.com

JAPAN

MIZUHO FINANCIAL GROUP

The wave of consolidations taking place in the Japanese financial sector is hitting banks hard: Mizuho Financial Group, Japan's second-biggest lender by assets, saw profits fall by 23% in the third quarter of 2006, but it is taking actions to deal with its problems. In January it announced plans to merge two of its affiliated brokers to create Japan's fourth-largest securities company by assets and its third-largest by revenues. That followed a massive fundraising in November that shored up the bank's capital and gave it cash to expand in investment banking in Japan and abroad and benefit from increasing overseas takeovers by Japanese companies. As part of this move, Mizuho listed on the New York Stock Exchange in 2006 and received a license to conduct commercial banking and investment banking operations in the United States.

Terunobu Maeda, president and CEO

www.mizuho-fg.co.jp

SINGAPORE

DBS

Competition in Singapore is fierce. UOB Group achieved strong growth in the first nine months of 2006, with net profit after tax increasing 59.2%. However, its rise in earnings was due mainly to a one-time gain from the divestment of Overseas Union Enterprise Ltd and Hotel Negara. DBS, by contrast, announced record earnings for full-year 2006, up 32% from the previous year. For the fourth quarter, net profit rose 45%. The strong performance for both the full year and the fourth quarter was underpinned by continued growth in the bank's customer franchise as interest and fee income reached new annual and quarterly highs.

Jackson Tai, CEO

www.dbs.com

Copyright Global Finance Media Inc. Apr 2007

Provided by ProQuest Information and Learning Company. All rights Reserved