Nations worldwide are dealing with the economic costs of the coronavirus pandemic and turning to the biggest banks on earth to keep markets functioning, and to pump credit into the global economy, propping up businesses and households. As the world works to recover from the pandemic, the banking industry’s titans in the United States, Asia, and Europe will help push an unprecedented worldwide stimulus reaching trillions of dollars back into the global economy.
Banks dominate the 2020 Forbes Global 2000 list, a measure of the world’s largest and most successful companies. Lenders’ importance has rarely been greater as businesses work to stay afloat, markets continue to hum and savers manage their assets. U.S. and Chinese banks lead the industry. Lenders in Europe appear to be stagnating and those in emerging markets like Brazil suffer from volatile economic cycles, or have yet to crack the top 100, like India.
This year, China Construction Bank supplanted JPMorgan Chase, #3, as the world’s second largest company, while the Industrial and Commercial Bank of China again took the top spot. Four Chinese banks, including Agricultural Bank of China, #5, and Bank of China, #10, made it in the top 10 of the Forbes Global 2000, while JPMorgan, Bank of America, #8, Wells Fargo, #17, and Citigroup, #20, finished inside the top 20.
So far, lenders in the U.S. have been tasked with the biggest coronavirus response. In the days and weeks after the pandemic hit, U.S. corporations drew on over $500 billion in credit, much of it from America’s four biggest banks. Regulators have helped lenders forbear on business, mortgage and credit card loans as the pandemic passes, in part due to banks’ strong capital and liquidity heading into the pandemic. Congress’s approval of hundreds of billions of dollars in support for small businesses has flowed to millions of small businesses nationwide through lenders big and small. Add in $2 trillion in Federal Reserve stimulus to markets, and the role of large banks has hardly ever been greater.
With unemployment surging to 14.7% and the economy slipping into a deep recession, banks atop the Forbes Global 2000 have been resilient to the economic shock. Firms made money in the first quarter, despite building over $20 billion in loan loss provisions.
As some industries founder (think airlines and energy) few see imminent risks to the banking sector. Investor Chris Davis, of $23 billion in assets Davis Advisors, says the recapitalized sector is likely to withstand the coronavirus. “This will be the test that I think will validate just how different the industry is after having gone through the financial crisis,” Davis tells Forbes. “‘As a long-term financial stock investor, the banks were not going to get the respect they deserve until they’re tested by going through a recession.”
While the U.S. banks appear the healthiest heading into the pandemic, China’s are the largest. China had seven banks inside the top 50, including China Merchants Bank, #26, Postal Savings Bank of China, #30, and Bank of Communications, #45, while the U.S. had six, including Goldman Sachs,#47, and Morgan Stanley, #48.
Within the top 100, Canada had three banks: RBC, #35, Toronto-Dominion Bank, #46, and Bank of Nova Scotia, #85. Japan had two banks: Mitsubishi UFJ, #52, and Sumitomo Mitsui, #80.
In Europe, just three banks made the top 100: France’s BNP Paribas, #42, HSBC, #44, and Banco Santander, #55, and each lost ground. Others included Brazil’s Itau Unibanco, #78, and Australia’s Commonwealth Bank, #84.
Drop-offs include Banco Bradesco, #101, UBS, #109, China Citic, #113, Lloyd’s Banking Group, #115, and ING, #194.
The industry’s largest dropper was Russia’s Sberbank, which fell from #47 to #402, while Truist Financial in the U.S. was a notable gainer after the merger of predecessors BB&T and SunTrust, rising nearly 100 spots to #163.
Potential threats to all banks on the Forbes Global 2000 come from the looming crunch in business activity and spiking distress worldwide. Meanwhile, central banks’ response to the pandemic and the holding of interest rates globally at 0% are also cautionary signs. Negative rates have pummeled banks in Europe and Japan, and economic forecasters now see high odds of a similar situation in the U.S.
Outside of the macroeconomic situation, the sector faces a big looming risk from technology. Year in and year out, the biggest gainers on the Forbes Global 2000 are giant technology platforms in Asia and Silicon Valley like Alibaba BABA -0.8%, #31, Tencent, #50, Apple AAPL -0.1%, #9, Amazon AMZN +0.2%, #22, Google GOOGL -1.1%, #13, and Facebook , #39, which all are increasingly entertaining financial services.
Already Alibaba’s Alipay is a giant in financial services, while Tencent and Argentina’s MercadoLibre MELI +2.8% have figured out ways to integrate payments into their broader platforms. Last year, Apple struck a partnership with Goldman Sachs, while Google began working with Citigroup, and Amazon has been working with JPMorgan for years. These partnerships, and the potential for encroachment, will only continue in coming years.