How We Crunched the Numbers
To identify the world’s strongest banks, we evaluated 78 banks with total assets of $100 billion or more as of mid-March. The ratio of a bank’s Tier 1 capital to its risk-weighted assets accounted for 40 percent of each bank’s overall score. The ratio of nonperforming assets to total assets got a weighting of 20 percent, as did the ratio of reserves for loan losses to nonperforming assets. The ratio of deposits to funding accounted for 15 percent of the score. And the efficiency ratio, which compares costs with revenues, received a 5 percent weighting. Banks were ranked on each criterion, and the ranking positions were weighed and combined to determine the banks’ overall scores. Lenders that reported a loss in net income for 2012 or that failed the Federal Reserve’s most recent stress test were excluded. All data are for the banks’ 2012 fiscal year, which in most cases ended on Dec. 31. Banks that hadn’t reported data for fiscal year 2012 by March 31 weren’t included.
For the full story from the June 2013 issue of Bloomberg Markets, click here.