As Western banks were pummeled by the financials onslaught, China’s banking sector, along with related exchange traded funds (ETFs), were able to evade the punches and their banks could end up being tomorrow’s champions.
Lenders in China have the potential to expand internationally and become the Citicorps of tomorrow, writes Mark Ralston for the TIME.
Paul Schulte, an analyst with Japan’s Nomura, recently compared the balance sheets of banks in a number of countries and found that U.S. and European banks were highly leveraged, which means greater financial risk. The United States has a leverage ratio of 24.8 and Europe of 40.5. The U.S. leverage ratio in 1993, the year before the start of the asset bubble, was 20.
Meanwhile, Asia’s banks are greatly underleveraged with leverage ratios in China of 15.8, Hong Kong of 14.3, India of 11.6, and South Korea of 16.7. Average levels should be around 20.