Top prizes for coming through the financial crisis in better shape go to Spanish and Chinese banks. In a ranking of the world's most profitable banks, produced by The Banker magazine in July, the top three places were taken by Industrial and Commercial Bank of China (ICBC), China Construction Bank and Spain's Santander .
By contrast, a Bloomberg table of largest writes-downs and credit losses is topped by American and Swiss banks – Citigroup, Wachovia (now part of Wells Fargo), Bank of America and Merrill Lynch (now combined into one institution) and Switzerland's UBS.
For investors the question must be whether to buy into banks that were hit hard by the crisis - Citigroup and UBS for example - and could now be recovery plays, or go for those banks which have demonstrated good risk management coming into the crisis, seized upon the opportunities created and are now taking advantage of a less competitive market.
The leading Spanish banks Santander and BBVA fall firmly into this last category. Santander is considered by many analysts as the bank that played the crisis the best, although it was helped by a strict domestic regulator - the Bank of Spain - which insisted on additional provisioning during the boom and forbade Spanish banks from investing in the more exotic financial instruments.
Santander was the only winner from the three-way carve up of Dutch bank ABN Amro in 2007 which sealed the fate of Royal Bank of Scotland and Belgium's Fortis. Santander carried off the Brazilian assets which, combined with its own, now makes it the fourth largest player in one of the world's most promising emerging markets. BBVA, while often regarded as dull compared to the flamboyant Santander, has recently shown its own poise by acquiring distressed Texan bank Guaranty Financial.
But a word of caution - Spain's property bust and unemployment figures are among the worst in Europe and this needs to be factored into future earnings.
China's banks had their own problems a decade ago and have improved risk management and corporate governance vastly as a result - ironically, some of the advice came from Western banks which subsequently found themselves in trouble. Chinese banks now tower the globe in measures such as market capitalisation and profits, but the concern is that China's Rmb 4,000 bn (£355bn) fiscal stimulus is being channelled via the banks into property and equities. The bubble may eventually burst with all the implications that has for bank balance sheets.
Of the large American banks JP Morgan has come through the crisis the best scooping up the failed investment bank Bear Stearns and Washington Mutual along the way. The recovery play would be Citigroup - the US government has a 34 per cent stake in the bank and has already made a paper profit of $11bn on its shares.
With UBS the Swiss government has already disposed of its 9 per cent stake at a SFR1.2bn gain and the bank has reached a settlement of sorts with the US tax authorities over disclosing the names of wealthy private banking customers. The task facing new CEO Oswald Grubel to restore the bank's fortunes is huge, however - it's definitely a medium term project.
Brian Caplen is editor of The Banker, the leading global magazine for the banking industry. See www.thebanker.com.
