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Boom for French banks as Brexit damages British rivals

3 July 2017: The fallout from Brexit has pushed the UK’s leading banks further down The Banker’s latest ranking of the Top 1000 banks. UK banks made less than half the profits compared to French banks and the gap is likely to widen with a Macron business boost expected across the Channel.

Uncertainty following the EU referendum, coupled with a drop in the value of sterling, sent domestic-focused banks tumbling in the ranking. The Royal Bank of Scotland fell from 19th to 30th and Lloyds fell from 24th to 35th in the ranking, which uses Tier 1 capital as its key measure.

The ranking showed that internationally focused UK banks such as HSBC also fared badly. Despite holding on to 9th position, they suffered a 62% fall in profits, making this their worst result in seven years. HSBC previously topped the ranking in 2008.

In the 2007 ranking, UK banks collectively made $17.3bn in pre-tax profits, a 32% fall on the previous year, and approximately a quarter of what they made before the financial crisis. In 2008, UK banks delivered 10% of global banking profits; however, that contribution has shrunk to 1.80%. In contrast, French banks made $39.6bn in profits, double that of UK banks.

The Banker’s editor Brian Caplen said: “Brexit has dealt another blow to the UK banking sector, which was already struggling due to issues caused by the financial crisis and various other scandals. At the same time, French banks are shaping up as the strongest in Europe and the outlook for them is even more positive with pro-business Emmanuel Macron in the Élysée Palace.”

There is some good news for the UK banking sector from the challenger banks. Metro Bank rose 187 places from 969th to 782st with an 80% capital increase, although it is still making losses. Two challenger backs also entered the ranking for the first time: Aldermore at 805 and OneSavings at 993. Shawbrook returned to the ranking at 988.

While the performance of UK banks is less than stellar, they are doing better than some other European countries. Italy chalked up the largest country losses ($16.3bn) followed by Portugal ($3.7bn) and Greece ($3bn).

Italy’s UniCredit fell 16 places in the overall ranking to 45th. It recorded the highest losses of any bank ($10.9bn) and three other Italian banks feature in the Top 10 highest losses table.

Chinese banks still dominate the ranking although the top five Chinese banks saw their profits fall as the economy slowed down. Industrial and Commercial Bank of China (ICBC) came top for the fifth year running with $281bn in capital.

Banks in the other BRIC countries witnessed notable profit increases, including Russia (369%), Brazil (179%) and India (26%).