financial services
financial services
The Banking Titans That Power the Global Economy
Date: January 28, 2025
A Deep Dive into the World's Top Banking Institutions
China Is a Banking Superpower
- The largest 100 global banks held a combined $118 trillion in consolidated assets at the end of 20231.
- China accounted for around a third of total global bank assets1.
- The US was in second place with around $17.3 trillion in bank assets1.
Banking: A Lucrative Industry
Banking has evolved significantly in recent decades as technology has advanced. Yet the basic business model remains the same. Banks borrow money through customer deposits and then lend this capital out at higher rates via loans to individuals and businesses. The spread between the borrowing and lending rates – which is known as the Net Interest Margin (NIM) – is profit.
Today however, the vast majority of banks also make money from other activities. Some banks, such as JPMorgan Chase and Morgan Stanley, are very active in the wealth management space. Others, such as Goldman Sachs and Barclays, are heavily engaged in securities trading and capital markets activity (e.g. IPOs). These activities can be very lucrative for firms and can make up a large proportion of overall income.
What Is a Systemically Important Bank?
A systemically important bank (SIB) is a financial institution whose failure could have a significant impact on the overall stability of the global financial system and the broader economy. These banks are often referred to as “too big to fail” due to their interconnectedness with other financial institutions, and as a result they are closely monitored by major financial regulators.
The Financial Stability Board (FSB) and the Basel Committee on Banking Supervision (BCBS) assess five criteria to identify global systemically important banks.
These are:
- Size – SIBs are usually large institutions with extensive operations and substantial consolidated assets.
- Complexity – SIBs tend to have complex business models that involve a wide range of financial activities.
- Interconnectedness – SIBs typically have extensive relationships with other financial institutions.
- Cross-jurisdictional activity – SIBs tend to operate in multiple countries, meaning that their failure could potentially create global problems.
- Substitutability/financial infrastructure – SIBs often provide essential financial infrastructure or play a significant role in a particular market, meaning that their failure could cause substantial disruptions and liquidity issues.
Why Invest in Banks?
Investing in banks can offer several potential benefits including:
- Long-term growth potential – The potential for long-term growth in the banking sector is underpinned by factors such as economic expansion, increasing global wealth, and rising stock markets.
- Diversified revenue streams – Large banks today tend to generate income from many different financial activities including retail banking, commercial banking, investment banking, wealth management, securities trading, payments, and currency exchange.
- Scalability – Banks often engage in activities that are very scalable such as wealth management and broker dealer services.
- Dividend income – Many banks have a history of paying dividends to their shareholders, so bank stocks often offer two potential sources of return.
Gain Access to the World’s Most Dominant Banks with the Themes Global Systemically Important Banks ETF
With the Themes Global Systemically Important Banks ETF (GSIB), investors can get one-click access to a diversified portfolio of leading banks. This ETF provides exposure to the 28 publicly-traded global banks that have been identified as “systemically important” by the Financial Stability Board (FSB) and the Basel Committee on Banking Supervision (BCBS).
Footnotes:
1S&P Global, as of April 5, 2024
