The World’s Largest Banks

Ichiro Suzuki

Bank of America shares have officially returned to where they were prior to the global financial crisis that began in 2007. Its share price peaked at 53, at the height of the housing boom that culminated into an unprecedented crisis. Under CEO Brian Moynihan since then, the bank slowly and persistently worked on restructuring of its businesses and reconstruction of damaged balance sheets. While its share price has recovered the all time high, its equity market capitalization already is more than twice as large as the previous peak when its share price was 53. Share price’s gross under-performance over equity market capitalization is attributed to heavy dilution that was caused by massive issuance of new shares to inject capital to boost its balance sheets. Bank of America today is the second largest bank, a distant second at about half the size of J.P. Morgan’s  US$800 billion. 

While U.S. banks represent half of the list of the world’s ten largest banks, Chinese banks also have strong presence with four. The two largest Chinese banks, Agricultural Bank and ICBC, are almost identical to Bank of America in their size. The two are followed by China Construction Bank and Bank of China in the top ten. Chinese banks once dominated the top ten list at a time when the Chinese economy was growing at breakneck speed. Then, not surprisingly, Chinese banks receded as the economy slowed down to more sustainable growth rates. In recent years, there are no shortages of headlines on the Chinese economy’s struggle. 

Chinese banks, however, have refused to disappear anmid adversary macro backdrops, in sharp contrast to total vanishment of Japanese banks. In the booming economy of the 1980s, Japanese banks fiercely expanded their balance sheets. They were especially aggressive in real estate lending in a country where land was believed to be in acute shortage. When the economy peaked at the outset of the 1990s and began to fall fast, taking the real estate and stock markets down with it, Japanese banks’ fortune had radically changed, forever. Through the middle of the first decade of the 21st century, mere survival through recapitalizing their balance sheets was their only concern. Recapitalization took place by aggressive write-down of non-performing loans, bank mergers and issuance of new shares that caused heavy dilution, as was the case with Bank of America. In the drawn-out process of admitting their problems in the first place, their shares were brought down to earth, to fractions of what they once were in the late 1980s. This is how Japanese banks had disappeared from the list of largest banks. 

Two decades after Japanese banks, Chinese banks dominated the world, in terms of size, essentially in the same fashion, and then had suffered severe setbacks also for the same reason, which was popping of a real estate bubble followed by material deceleration of the economy. If anything, China’s slowdown may have been more intense than Japan’s experiences.

Despite immense hardships, Chinese banks refused to be decimated, unlike Japanese counterparts. Today they still have four places on the list of the ten largest. Collapse of China’s real estate market didn’t take any major bank down with it. State ownership of banks obviously helped. On top of it, Chinese banks have escaped the ordeals of Japanese banks, because reckless expansion of real estate developers was not wholly financed by bank lending, which was a case in Japan and also in Europe. Developers have sourced a considerable portion of their funds through floating debt securities in the market, soliciting funds from those who were eager to participate in the booming Chinese economy, as it seemed at one point. Foreign investors flocked to Chinese private sector bonds. In addition, developers sold high yield financial products to retail investors. In a land of limited choice of investments for the household sector, such products became wildly popular and an important source of funds for developers, in place of bank lending. 

Evergrande was an epitome of the rise and fall of real estate developers in China. After a meteoric rise in the previous decades, with its equity market capitalization hitting US$51 billion in 2017, Evergrande defaulted its U.S. dollar-denominated debt in December 2021, and has struggled in the following years to unload its real estate holdings, with no avail. In January 2024, the Hong Kong court ordered the company to liquidate itself and liquidation was imposed on its overseas subsidiaries in January 2025. In August 2025, the company was delisted from the Hong Kong Stock Exchange. Evergrande still owed over US$300 billion to creditors that included lenders, bond holders and financial products investors. Retail investors appear to have little chance of getting a fraction of their investments back, while institutional creditors’ outlook could be only marginally better than retail investors. 

Investors have lost almost all their money. The spectacular fall of Evergrande, however, didn’t inflict serious blow to the banking sector, since much of its financial risks were absorbed in the financial markets, not concentrated on bank balance sheets. In fact, the tech bubble’s breathtaking bust in the U.S. at the outset of this century didn’t affect banks, because all the risks were taken by equity investors, retail or institutional. On the other hand, the housing market debacle several years later fully hit the banking system, to cause the deepest recession in seventy years. Chinese real estate developers in general went through the same trajectory as Evergrande. Smaller damages to the banking system on the collapse of the real estate market than would otherwise have been the case has prevented the Chinese economy from falling into more acute slowdown. That said, real estate bust has still inflicted serious blows to the economy, hitting the household sector hard. Its balance sheet is damaged by spectacular falls in prices of both houses and investment products. The Communist Party is well aware that household sector consumption needs to be lifted to keep the economy going. It seems an uphill battle to boost private consumption in the face of impaired balance sheets and the weak job market. 

 About the author: Mr. Suzuki is a retired investor based in Tokyo, Japan.