Top 20 Most Profitable Banks in the World
In this piece, we will take a look at the top 20 most profitable banks in the world. If you want to skip our analysis of the banking industry and the trends in the U.S. economy, you can head on over to Top 5 Most Profitable Banks in the World.
The economy is made up of money. And money is managed by banks. Therefore, banks have a central place in any economy and their health often determines the fate of millions of people in a country and billions worldwide.
One of the most striking examples of how an imbalance in the banking industry can devastate millions is the 2008 global financial crisis. This crisis was purely due to banks making risky bets on financial instruments called mortgage backed securities. As the title suggests, these securities were basically a bet on people who had taken out mortgages to make regular payments. The banks sold the potential of these payments to investors willing to take the risk, and some of them also leveraged their portfolios on these instruments. Some of these banks that did invest in the mortgage securities were also left insolvent as their market value dropped due to a housing market crash - leading to a chain reaction that threatened the existence of the U.S. economy.
After the 2008 crisis, the government sprung into action and passed a sweeping set of reforms dubbed the Dodd-Frank Wall Street Reform and Consumer Protection Act. This act increased banks' capital requirements (the money or investments they have to hold to ensure they can meet a large scale cash withdrawal), created a body to monitor predatory lending, increased SEC oversight of credit rating agencies, and other measures.
So why is this history lesson important? Well, after the 2008 financial crisis, 2023 was the most turbulent year for the U.S. banking sector. In March, three banks, Signature Bank, Silicon Valley Bank, and First Republic Bank failed in just a handful of days - shocking consumers, investors, and government officials alike. In the aftermath, debate raged about whether the Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 which repealed some of Dood-Frank's changes such as increasing the asset threshold for stress tests and also removed the Volcker Rule for smaller banks, was also responsible for the banking crisis. Some believe that it is, while others argue that even if Silicon Valley Bank was stress tested in 2022, it would have nevertheless passed since the Fed's requirements for this test were unreflective of the yields and losses that eventually caused its demise.
A big reason that these banks failed is the aggressive interest rate hiking spree from the Federal Reserve since the banks had loaded their portfolio with treasury bonds issued at a time when interest rates were low. Naturally, as the rates rose, the value of these bonds dropped. This forced the banks to take massive losses when they liquidated the securities. However, the banking industry might be in for some good news since a fresh economist poll from Bloomberg shows that only one third believe that the Fed might increase interest rates in July. The central bank is slated to evaluate its monetary policy in both June and July, and the economists' view stands in contrast to some market participants who believe that a 25 basis point hike should take place in July. The dovish economists including those from Nomura, and those part of Bloomberg's own team believe that a dovish approach might be difficult for Fed Chair Jerome Powell to sell to his team.
Developments in America's banking industry are relevant to the global banking sector as well since most of the world's richest, largest, and biggest private banks are American. For instance, the world's biggest private bank is the financial behemoth JPMorgan Chase & Co. (NYSE:JPM). JPMorgan is followed by Bank of America Corporation (NYSE:BAC) as the second largest American bank in terms of assets. Cumulatively, in the list of the world's top ten largest banks by assets, two are American, one is Japanese, one is British, and two are French. The rest are Chinese government banks.
Apart from America though, one of the biggest players in the global banking industry is Japan. Out of the top twenty largest banks by assets, four are Japanese, tying with the U.S. France and Britain follow in second and third places respectively, with three and two banks in the list of the world's top 20 biggest banks.
The bit about stress tests being inadequate to stop bank failures was also mentioned by the chief executive officer of JPMorgan Chase & Co. (NYSE:JPM) in an interview with Bloomberg Television in May where he shared:
The people to blame are the bank CEOs, the bank boards, and things like that. Having said that, I think there needs to be humility on part of the regulators. That the Federal Reserve itself never forecasted interest rates going up. Not one Fed Governor forecasted. And whether you forecast it or not, you should be stress testing people for it. Their stress tests always have lower rates, we always knew about uninsured deposits, and there are huge incentives for banks to put securities in held to maturities, lower capital requirements. Huge incentives to own treasuries, lower capital requirements. And they counted for liquidity. And I'm hoping all that gets looked at, and they should look at and say okay we're a little bit part of the problem as opposed to just pointing fingers.
With these details in mind, let's take a look at the world's most profitable banks out of which the top players are Preferred Bank (NASDAQ:PFBC), Parke Bancorp, Inc. (NASDAQ:PKBK), and ServisFirst Bancshares, Inc. (NYSE:SFBS).
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Our Methodology
When deciding how to compile our list of the most profitable banks, we had to choose between two metrics - the net profit or the net margin. We decided to choose the latter for bank profitability since it measures the cents that a firm earns on each dollar of sales. This also removes a bias on our list that would be present if we had used absolute profit figures as the larger banks would dominate the list of the world's most profitable banks (You can take a look at the world's biggest banks here). All figures of Net Margin are sourced from Morningstar Financial.
Top 20 Most Profitable Banks in the World
20. BancFirst Corporation (NASDAQ:BANF)
Latest Net Margin: 36.07%
BancFirst Corporation (NASDAQ:BANF) is the holding company for the BancFirst Bank. It is one of the more diversified banks on our list, with metropolitan, community, and other divisions.
6 of the 943 hedge funds profiled by Insider Monkey had held BancFirst Corporation (NASDAQ:BANF)'s shares as of Q1 2023. The firm's largest investor is Ken Griffin's Citadel Investment Group with a $6.2 million stake.
Along with Preferred Bank (NASDAQ:PFBC), Parke Bancorp, Inc. (NASDAQ:PKBK), and ServisFirst Bancshares, Inc. (NYSE:SFBS), BancFirst Corporation (NASDAQ:BANF) is one of the most profitable banks in the world.
19. Hancock Whitney Corporation (NASDAQ:HWC)
Latest Net Margin: 36.24%
Hancock Whitney Corporation (NASDAQ:HWC) is a regional bank headquartered in Gulfport, Mississippi. It provides banking services to small business and retail customers. These range from standard products such as checking and savings accounts to investment products such as exchange traded and mutual funds.
By the end of 2023's first quarter, 18 of the 943 hedge funds part of Insider Monkey's database had bought a stake in the bank. Hancock Whitney Corporation (NASDAQ:HWC)'s largest hedge fund investor in our database is Israel Englander's Millennium Management with a $24 million stake.
18. Independent Bank Corp. (NASDAQ:INDB)
Latest Net Margin: 36.58%
Independent Bank Corp. (NASDAQ:INDB) is a Massachusetts based regional bank. It is one of the older banks on our list, since it was set up in 1907. The bank caters to the needs of both businesses and retail customers in its home state.
Insider Monkey took a look at 943 hedge funds for their first quarter of 2023 shareholdings and found out that 13 had held Independent Bank Corp. (NASDAQ:INDB)'s shares. Jim Simons' Renaissance Technologies is its largest shareholder, owning 262,196 shares that are worth $17.2 million.
17. Esquire Financial Holdings, Inc. (NASDAQ:ESQ)
Latest Net Margin: 36.62%
Esquire Financial Holdings, Inc. (NASDAQ:ESQ) is a young bank set up in 2006 and headquartered in Jericho, New York. While primarily a regional bank, it serves customers all over America.
Nine of the 943 hedge funds polled by Insider Monkey for their March quarter of 2023 investments had held the bank's shares. Esquire Financial Holdings, Inc. (NASDAQ:ESQ)'s largest investor is Matthew Lindenbaum's Basswood Capital with a $22 million stake.
16. Plumas Bancorp (NASDAQ:PLBC)
Latest Net Margin: 37.99%
Plumas Bancorp (NASDAQ:PLBC) is a regional bank with operations in some regions of California and Nevada. It offers deposit accounts and a variety of leans.
By the end of Q1 2023, two of the 943 hedge funds part of Insider Monkey's database had invested in Plumas Bancorp (NASDAQ:PLBC). Israel Englander's Millennium Management is its largest shareholder with a $1.3 million stake.
15. The Bancorp, Inc. (NASDAQ:TBBK)
Latest Net Margin: 38.42%
The Bancorp, Inc. (NASDAQ:TBBK) is a Delaware holding company for The Bancoprp Bank. It provides standard banking products to individuals and businesses and payment processing services to businesses.
Insider Monkey's first quarter of 2023 survey of 943 hedge funds outlined that 16 had held a stake in the bank. The Bancorp, Inc. (NASDAQ:TBBK)'s largest investor is Connor Haley's Alta Fox Capital Management with a $15.6 million investment.
14. Oak Valley Bancorp (NASDAQ:OVLY)
Latest Net Margin: 39.83%
Oak Valley Bancorp (NASDAQ:OVLY) is a Californian bank based in Oak Valley, California. Its operations are based primarily in the Central Valley and Eastern Sierras. Like other regional banks, it serves small and medium businesses and retail customers.
As of March 2023, four of the 943 hedge funds profiled by Insider Monkey had invested in Oak Valley Bancorp (NASDAQ:OVLY). Phil Stone's Fourthstone LLC is its largest hedge fund shareholder since it owns 329,031 shares that are worth $7.7 million.
13. The Bank of N.T. Butterfield & Son Limited (NYSE:NTB)
Latest Net Margin: 40.49%
The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) is another old bank on our list. Set up in 1858, it is headquartered in Hamilton, Bermuda, and offers its services in Europe, Asia, and The Bahamas.
14 of the 943 hedge funds part of Insider Monkey's Q1 2023 survey covering 943 hedge funds had bought The Bank of N.T. Butterfield & Son Limited (NYSE:NTB)'s shares. Out of these, the firm's largest investor is Phill Gross and Robert Atchinson's Adage Capital Management with a $32 million investment.
12. Macatawa Bank Corporation (NASDAQ:MCBC)
Latest Net Margin: 41.53%
Macatawa Bank Corporation (NASDAQ:MCBC) has more than two dozen branches in its home state Michigan. The firm provides loans, deposit accounts, and other products.
After digging through 943 hedge funds for their first quarter of 2023 investments, Insider Monkey discovered that eight had held a stake in the bank. Macatawa Bank Corporation (NASDAQ:MCBC)'s largest hedge fund investor is John K. Schneider's Rhino Investment Partners as it owns a $10 million stake.
11. Greene County Bancorp, Inc. (NASDAQ:GCBC)
Latest Net Margin: 41.98%
Greene County Bancorp, Inc. (NASDAQ:GCBC) is a New York based bank set up in 1889. It has a significant real estate operation base and it operates an REIT as well.
Only one hedge fund of the 943 part of Insider Monkey's database had bought Greene County Bancorp, Inc. (NASDAQ:GCBC)'s shares in March 2023. This lone investor is Jim Simons' Renaissance Technologies which owns a $471,000 stake.
10. Bank OZK (NASDAQ:OZK)
Latest Net Margin: 43.84%
Bank OZK (NASDAQ:OZK) is the holding company for the Bank of the Ozarks. Bank of Ozarks is a community bank, and its holding company is headquartered in Little Rock, Arkansas.
23 of the 943 hedge funds profiled by Insider Monkey had held and invested in Bank OZK (NASDAQ:OZK)'s shares. Its largest shareholder is Ric Dillon's Diamond Hill Capital with a $74 million investment.
9. First Financial Bankshares, Inc. (NASDAQ:FFIN)
Latest Net Margin: 44.99%
First Financial Bankshares, Inc. (NASDAQ:FFIN) is a Texas only community bank headquartered in Abilene, Texas. It provides a variety of loans, and apart from standard accounts, also manages trusts.
Insider Monkey dug through 943 hedge funds for their first quarter of 2023 portfolios and found out that 14 had bought the firm's shares. First Financial Bankshares, Inc. (NASDAQ:FFIN)'s largest hedge fund investor is Israel Englander's Millennium Management with a $10.9 million stake.
8. International Bancshares Corporation (NASDAQ:IBOC)
Latest Net Margin: 46.65%
International Bancshares Corporation (NASDAQ:IBOC) is another Texas based bank. It offers services in its home state and in Oklahoma.
15 of the 943 hedge funds profiled by Insider Monkey had bought International Bancshares Corporation (NASDAQ:IBOC)'s shares as of March 2023. Peter Rathjens, Bruce Clarke, and John Campbell's Arrowstreet Capital is the biggest shareholder with a $673 million stake.
7. Cathay General Bancorp (NASDAQ:CATY)
Latest Net Margin: 46.67%
Cathay General Bancorp (NASDAQ:CATY) is a Californian bank that focuses primarily on providing services to Chinese Americans. It is headquartered in Los Angeles, California.
As of March 2023, 14 out of the 943 hedge funds surveyed by Insider Monkey had bought and invested in the bank's stock. Cathay General Bancorp (NASDAQ:CATY)'s largest hedge fund shareholder is Cliff Asness's AQR Capital Management since it owns 381,989 shares that are worth $13 million.
6. Prosperity Bancshares, Inc. (NYSE:PB)
Latest Net Margin: 47.09%
Prosperity Bancshares, Inc. (NYSE:PB) is a relatively large bank, with close to three hundred branches in Texas around major metropolitan areas.
20 of the 943 hedge funds part of Insider Monkey's database had invested in Prosperity Bancshares, Inc. (NYSE:PB) during Q1 2023. Out of these, Ken Griffin's Citadel Investment Group is the largest shareholder since it owns $72 million worth of shares.
Preferred Bank (NASDAQ:PFBC), Prosperity Bancshares, Inc. (NYSE:PB), Parke Bancorp, Inc. (NASDAQ:PKBK), and ServisFirst Bancshares, Inc. (NYSE:SFBS) are some of the most profitable banks in the world.
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Disclosure: None. All investment decisions should be made after consulting a qualified professional. Top 20 Most Profitable Banks in the World is originally published on Insider Monkey.
