• Nordic banks in Denmark, Sweden, Finland, and Iceland recorded average LDRs above 150%
  • Banks in North America reported a low average LDR of 63% in 2022
  • Chile and Brazil had the highest LDRs in South America; New Zealand and South Korea had the highest average LDRs in Asia Pacific

Around 22% of the 1,000 largest banks worldwide posted a net loan-to-deposit ratio (LDR) higher than 100% according to data from the TAB Global 1000 World’s Largest Banks Ranking 2023 by TABInsights, the research arm of The Asian Banker. Additionally, Nordic banks in Denmark, Sweden, Finland, and Iceland recorded asset-weighted average LDRs above 150% in 2022, significantly exceeding the average for the world’s 1,000 largest banks, which stood at 82%.

The LDR serves as a crucial metric for evaluating bank liquidity and ideally falls within a balanced range, neither excessively high nor low. Excessive loans relative to deposits often indicate more aggressive lending practices and may lead to liquidity issues. Conversely, a low ratio may suggest sub-optimal earnings.

Half of South American banks had LDRs above 100%

South American banks in the ranking had the highest average LDR at 109%, followed by Europe at 96%. These regions also exhibited the highest proportions of banks with LDRs greater than 100%. Around 50% of South American banks exceeded an LDR ratio of 100%, while in Europe, the proportion was slightly lower at 42%. These percentages significantly surpass those observed in other regions: Africa at 10%, Asia Pacific at 12%, and North America at 13%.

Banks in North America reported a low average LDR of 63% in 2022, partially attributed to the preference for capital markets as the primary source of corporate funding. Specifically, the average LDR of US banks stood at only 59%, an increase from 54% in the previous year due to deposit outflows.

Additionally, banks in Asia Pacific and Africa maintained average LDRs below 80%. In Asia Pacific, markets such as Japan, Pakistan, Hong Kong, and the Philippines reported average LDRs lower than 70%. In Africa, Nigeria is one of the markets with the lowest average LDRs globally, experiencing a decline from 55% to 53% compared to the previous year. Banks in Nigeria failing to meet the minimum LDR requirement of 65% face penalties, including the withholding of central bank reserves equivalent to 50% of the lending shortfall.

Nordic banks had the highest LDR exceeding 150%

Among the top 10 countries with the highest average LDRs, five are from Europe, two from Asia Pacific, two from South America, and one from the Middle East. Generally, banks in these nations exhibit significant dependence on wholesale funding.

Banks in Denmark had the highest average LDR at 168%, followed by Sweden (159%), Finland (158%), and Iceland (152%). Danske Bank and Jyske Bank, the two largest banks in Denmark, reported high LDRs of 160% and 268%, respectively, primarily due to their significant reliance on covered bonds and mortgage bonds as sources of funding. Danish law mandates that mortgage loans must be funded by covered bonds, contributing to banks’ reliance on this form of financing. The Nordic covered bond markets are known for their stability and resilience.

Jyske Bank ranked among the top 10 banks with the highest LDRs among the world’s 1,000 largest banks, alongside SBAB Bank and Lansforsakringar Bank from Sweden, which have LDRs of 279% and 250%, respectively.Nordic banks had the highest LDR exceeding 150%

Chile and Brazil had the highest LDRs in South America, while New Zealand and South Korea had the highest average LDRs in Asia Pacific

The average LDRs of Chilean and Brazilian banks were the highest in South America, contrasting with Argentina, where banks had the lowest average LDR due to a significant portion of their assets being held in securities portfolios. Among the world’s 1,000 largest banks, four of the top 10 banks with the highest LDRs are from Brazil, including Banco ABC Brasil (291%), Banco Daycoval (289%), Banco da Amazonia (231%), and Banco Safra (222%). However, the average LDR of Brazilian banks stood at 110%, as the three largest banks in the country—Itau Unibanco, Banco do Brasil, and Banco Bradesco—posted relatively lower LDRs at 99%, 111%, and 103%, respectively.

In Asia Pacific, banks in New Zealand and South Korea recorded the highest LDRs, at 125% and 120%, respectively, followed by Australia (108%) and Vietnam (100%). The Industrial Bank of Korea recorded the highest LDR in South Korea, standing at 199% in 2022. As a vital policy bank providing credit to small businesses, its stable access to funding is supported by the state’s implicit solvency guarantee. South Korea’s financial regulators eased LDR requirements on corporate loans in October 2022 in response to increased demand caused by a contraction in the corporate bond market. The LDR ceiling for corporate loans was raised to 105% for commercial banks and 110% for savings banks, with a gradual reversal of these relaxed regulations starting in the second half of 2023.

See the full list of the World’s Largest Banks here 
See the full list of the World’s Strongest Banks here