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Weekend reading: The safest banks in the world?

Weekend reading

Good reads from around the web.

I wonder what  we’re supposed to learn from Global Finance Magazine’s 2012 ranking of the top 50 safest global banks?

Or more pertinently, I wonder what it learned from its previous lists?

As a blog by the Wall Street Journal points out:

In 2007, the Top 50 counted as Numbers 11-13 Citigroup, Royal Bank of Scotland and Dexia. The list also included HBOS, Wachovia, ABN Amro and Fortis.

One financial crisis later and the idea that any of those banks were safe in 2007 is laughable.

We all know what happened to HBOS and RBS, and most of the others cited met a similar fate.

For the record here are its 2012 rankings, which are derived using long-term credit ratings and total assets:

1. KfW – (Germany)

2. Bank Nederlandse Gemeenten (BNG) – (Netherlands)

3. Zürcher Kantonalbank- (Switzerland)

4. Landwirtschaftliche Rentenbank- (Germany)

5. Landeskreditbank Baden-Württemberg – Förderbank (L-Bank) – (Germany)

6. Caisse des Dépôts et Consignations (CDC) – (France)

7. Nederlandse Waterschapsbank – (Netherlands)

8. NRW.Bank – (Germany)

9. Banque et Caisse d’Épargne de l’État – (Luxembourg)

10. Rabobank Group – (Netherlands)

11. TD Bank Group – (Canada)

12. Bank of Nova Scotia- (Canada)

13. DBS Bank – (Singapore)

14. Oversea-Chinese Banking Corp – (Singapore)

15. United Overseas Bank – (Singapore)

16. Caisse centrale Desjardins – (Canada)

17. Royal Bank of Canada – (Canada)

18. National Australia Bank – (Australia)

19. Commonwealth Bank of Australia – (Australia)

20. Westpac Banking Corporation – (Australia)

21. Australia and New Zealand Banking Group – (Australia)

22. Kiwibank – (New Zealand)

23. HSBC Holdings – (United Kingdom)

24. Nordea – (Sweden)

25. Bank of Montreal – (Canada)

26. Canadian Imperial Bank of Commerce – (Canada)

27. Svenska Handelsbanken – (Sweden)

28. China Development Bank –(China)

29. Bank of New York Mellon Corp – (United States)

30. Agricultural Development Bank of China – (China)

31. National Bank of Abu Dhabi – (United Arab Emirates)

32. CoBank ACB – (United States)

33. Pohjola Bank – (Finland)

34. National Bank of Kuwait –(Kuwait)

35. DZ Bank – (Germany)

36. Banque Fédérative du Crédit Mutuel (BFCM) – (France)

37. U.S. Bancorp  – (United States)

38. National Bank of Canada – (Canada)

39. Northern Trust Corp – (United States)

40. Qatar National Bank – (Qatar)

41. Samba Financial Group – (Saudi Arabia)

42. BancoEstado – (Chile)

43. La Banque Postale – (France)

44. Bank of Taiwan – (Taiwan)

45. Shizuoka Bank – (Japan)

46. Banco de Chile – (Chile)

47. BNP Paribas – (France)

48. Wells Fargo – (United States)

49. Standard Chartered – (United Kingdom)

50. SEB – (Sweden)

So two British banks on the list, including recently-mauled Standard Chartered.

Personally, despite my despair over bankers and their salaries, I think many banks may prove good investments from here, especially the more stodgy retail ones.

US giant Wells Fargo, for instance, meets my idea of a safe bank. It currently trades at around 1.7 times tangible book value. That’s far more than the 0.5 times investors are prepared to pay for Lloyds, for example, yet the premium seems to me deserved after Wells came through the sub-prime meltdown and subsequent crisis with flying colours. It has a very sound old-fashioned business model, too, based around a vast horde of cheap customer deposits rather than wholesale funding.

Wells traded at well over three times tangible book value before the crisis. I’m sure it will again some day, and I’m toying with buying.

(For the record, I have traded in and out of Lloyds for a sum total of roughly diddly-squat for the past few years and currently hold it and, more profitably, its preference shares. Standard Chartered is a long-term hold for me).

From the money blogs

Product of the week: British Airways is offering 70% off its Indian holidays, which it is pitching at those suffering from a post-Olympics comedown. (Personally, I just filled the void with an Indian takeaway).

Mainstream media money and investing

  • Swedroe: How to test your financial security – MoneyWatch
  • Roth: After scraping the bottom, interest rates spike – MoneyWatch
  • Is university worth the fees? – This is Money
  • Real money equity trading at decade lows – FT Alphaville
  • Merryn: Gold’s glittering future? – FT
  • Savers spunk £1.1 billion into expensive funds of funds – FT
  • Rarity is the key to champion sports investing – FT
  • Rents rise to a new high – Telegraph
  • FTSE 100 CEO pay rises 8.5% to £3m for first time – Independent
  • ‘Risk fatigue’ has set in among investors – Independent
  • Goal Soccer Centres and apathy around small caps – Independent
  • House prices rise three times faster than wages in a decade – Guardian

Book of the week: Joel Greenblatt’s You Can be a Stock Market Genius is a legendary classic, and not only for the title. No, it’s not ironic, but it is indicative of the witty, unapologetic prose. I’ve enjoyed re-reading it. Only for the most active investors.

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{ 4 comments… add one }
  • 1 gadgetmind August 18, 2012, 3:58 pm

    I hold both LLPC and LLOY, and am actually about 12% up on the latter. The former are doing even better now that dividends are flowing again, so let’s just hope they don’t pause/stop.

    However, I don’t regards these are safe and the p/b ratios suggest that no-one else does either.

    Not investments for widows and orphans.

  • 2 James August 18, 2012, 7:58 pm

    Well, there are kind of a lot of banks on that list – do you have any thoughts on an ETF that would give you some exposure to the better companies in this sector? That might be be the next step for your readers.

  • 3 Evan August 23, 2012, 2:12 am

    Does the list take into account the FDIC (Federal Insurances for deposits up to $250K) or the equivalent in other countries? For example who cares if bank 27 is safer if the country where the bank is located doesn’t insure the deposits (I didn’t look at the list for #27 btw lol)?

  • 4 The Investor August 23, 2012, 9:54 am

    @Evan — I think it’s based in corporate ratings and balance sheets rather than consumer level protection. Absolutely agree that spreading your money between government guaranteed accounts is the biggest first safety step for private investors!

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