The world is starting to see the glimmering of light at the end of the long Covid-19 pandemic tunnel, but for most there is still a long way to go.
After more than a year of ensuring client support remained uninterrupted, remodeling operations to meet the new realities, reorganizing supply chains and protecting employees, banks are referring to “pre-pandemic level” more frequently in their conversations.
J.P. Morgan, which takes the top honor as Global Finance’s World’s Best Bank 2021 as well as World’s Best Investment Bank and World’s Best Private Bank, kept its clients afloat during the early days of the pandemic while remaining a commanding global presence in raising capital, processing payments and reaffirming its commitment to sustainability.
Global Finance selected J.P. Morgan and other winners of the World’s Best Banks 2021 awards based on their performance over the past year and other criteria, including their reputation, management excellence and leadership in digital transformation and corporate citizenship. J.P. Morgan, for one, went the extra mile by quickly addressing the needs of its clients.
The bank provided more than $28 billion in funding for small businesses globally—not including the $4 billion provided by the US Small Business Administration’s Paycheck Protection Program—as well as extending more than $18 billion in credit.
Return to Normality?
Although J.P. Morgan and other financial institutions entered the initial phases of the pandemic in healthy positions and have made great strides in maintaining and growing support for their clients, it is too early for the banking industry to consider itself out of the woods, say the experts.
In March 2021, Moody’s updated its outlook of the US banking system to “stable” from “negative,” citing the industry’s improving operating environment and the slight buildup of reserves, which are expected to mitigate any pandemic-related charge-offs.
“We expect to see higher economic growth and lower unemployment, as the recovery that started in the second half of 2020 takes firmer hold,” said Rita Sahu, vice president and senior credit officer for Moody’s Financial Institutions Group, at the time.
“Additionally, asset risk has stabilized due to the significant reserves banks set aside as the coronavirus pandemic raged in 2020, while the realization of pandemic-related net charge-offs has been deferred because of forbearance programs and fiscal support.”
Three months later, S&P Global Ratings also dropped its net negative outlook for the global banking sector to 1%; it had been 31% in October 2020.
According to the ratings agency, its ratings outlook for 75% of banks is stable, up 10% from October.
However, the analysts expect that only nine of the top 20 banking systems will reach their pre-pandemic levels by 2022, while the rest might not reach it until 2023 or later, since many jurisdictions already have begun withdrawing their support for their economies.
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“There is an inevitable lag effect on banks’ credit profiles as household and corporate borrowers recover from the pandemic,” wrote the authors of S&P’s 2021 Midyear Outlook. “Banks need time to work through their asset quality difficulties.
While bank profitability will unquestionably remain muted in the continuing ultralow interest rate environment, lenders are better capitalized, more liquid and less leveraged compared with where they were in 2009 (the other significant recent downturn affecting banks globally).”
Along with the Best Bank in the World, global honors include Best Corporate Bank, Best Consumer Bank, best banks worldwide in emerging and frontier markets, Best Bank for Sustainable Finance, Best Global Transaction Bank and Best Sub-custodian Bank.
All are being announced here for the first time. Previously announced honors included Best Islamic Financial Institution, Best Investment Bank, Best Cash Management Bank, Best Trade-Finance providers, Best Supply Chain Finance providers, Best Foreign Exchange Provider, Best Private Bank, and Global Outstanding Financial Innovator.
Methodology
The editors of Global Finance, with input from industry analysts, corporate executives and technology experts, selected the winners for the World’s Best Banks 2021 using information provided by banks and other providers as well as independent research, based on a series of objective and subjective factors.
It isn’t necessary to enter in order to win, but experience shows that the additional information supplied in an entry can increase the chance of success.
In many cases, entrants presented details that may not be readily available to the editors.
Judges considered performance over the period from January 1 to December 31, 2020, except for global winners, for which developments in the first half of 2021 were also considered.
Global Finance then applied a proprietary algorithm to shorten the list of contenders and arrive at a numerical score, with 100 signifying perfections.
The algorithm weights a range of criteria for relative importance, including knowledge of local conditions and customer needs, financial strength and safety, strategic relationships and governance, competitive pricing, capital investment and innovation in products and services.
Once the judges narrowed the field, they examined the final criteria, including scope of global coverage, size and experience of staff, customer service, risk management, range of products and services, execution skills and use of technology.
In the case of a tie, the judges lean toward local providers rather than global institutions. The panel also tends to favor private-sector banks over government-owned institutions.
The winners are those banks and providers that best serve the specialized needs of corporations engaged in global business.
We seek to honor not the biggest institutions but the best: those with qualities companies should look for when choosing a provider. – GLOBAL FINANCE
