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Evolution of leverage ratios since crisis: US banks top Asian, European peers


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Evolution of leverage ratios since crisis: US banks top Asian, European peers

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This article is a part of a series tracking the evolution of key bank metrics since the financial crisis.

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The world's biggest banks have seen their leverage ratios steadily increase over the years since the financial crisis, with U.S. banks still holding significantly higher ratios than their peers in Asia and Europe, according to data from S&P Global Market Intelligence.

Ten of the U.S. lenders in the 89-bank sample including Citigroup Inc. and Bank of America Corp. held double-digit leverage ratios — which, for the purposes of global comparison has been calculated below using total equity against total assets — as of the end of 2016.

Importantly, U.S. banks report their financials under U.S. GAAP, and are required to report the net amount of derivative assets on their balance sheets, which deflates there asset values and, as result, bolsters the ratio of total equity to total assets. If U.S. banks were to report on the same accounting principles as banks under IFRS, their total equity to total assets ratio would be lower than as shown below.

The 2016-end leverage ratios of European banks, which report under IFRS, ranged from 11.12% for PAO Sberbank of Russia at the top end down to 4.08% for Deutsche Bank AG.

In Asia, DBS Group Holdings Ltd. of Singapore held the highest leverage ratio at 9.75% as of 2016-end, while Japan-based Resona Holdings Inc. stood at the bottom of the table with a ratio of 4.02%, just 6 basis points below Deutsche Bank.

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