BEST DEVELOPED MARKET BANKS

Global Finance, Apr 2006 by Hawser, Anita, Neville, Laurence, Platt, Gordon

Global Finance unveils its annual list of the best banks in developed markets around the world.

The past year has been one of staggering growth for the world's top developed market banks. And while profits and revenues are breaking records, the banks' customers are benefiting from the boom times, too. As they build their global networks through organic growth and acquisition, the banks are becoming one-stop shops for global corporations. Increasingly, bank clients have to develop only one relationship to satisfy all their banking needs.

In selecting the winning banks, we considered factors that range from the quantitative objective to the informed subjective. Objective criteria were growth in assets, profitability, geographic reach, strategic relationships, new business development and innovation in products. Subjective criteria included the opinions of equity and credit ratings analysts, banking consultants and others in the industry.

Contributors: Anita Hawser, Laurence Neville and Gordon Platt

BERMUDA

BUTTERFIELD BANK

Butterfield Bank, Bermudas oldest and largest independent bank, has more than $100 billion of assets under administration, including $45 billion in Bermuda and $20 billion in the UK dependency of Guernsey in the Channel Islands. The bank balances its global asset-management and fund-administration businesses with its retail and corporate banking services in Bermuda, the Cayman Islands and Barbados. About half of the bank's revenue is generated from non-interest income. Its return on equity was 23.6% in 2005, up from 21.2% a year earlier. Earnings rose 20.9% to a record $109.4 million last year, reflecting strong loan demand and increased revenue from asset management, foreign exchange and administration services to hedge funds, mutual funds and offshore pension funds. Butterfield Private Bank in the United Kingdom returned to profitability in the second half of 2005 but posted a small after-tax loss for the full year after absorbing the operations of Leopold Joseph, which it acquired in 2004.

Alan R. Thompson, president and CEO

www.butterfieldbank.com

CANADA

SCOTIABANK

Scotiabank, which operates in 50 countries, is well capitalized and efficient. The bank posted record profits in the quarter ended January 31, up 8% from a year earlier. Profit from international banking increased 14% in the quarter. Scotiabank adopted a new corporate governance policy in November 2005 that requires majority voting for the election of directors. The bank's focus on acquisitions in 2006 will be on retail and commercial banking in Central America, Mexico, Peru and Chile, with the goal of leveraging networks it already has in place. Last year it acquired Banco de Comercio in El Salvador, which it combined with its existing banking operations in the country. In December 2005 Scotiabank agreed to purchase two Peruvian banks, Banco Wiese Sudameris and Banco Sudamericano. Once the transaction is complete, Scotiabank will own 80% of the new combined Peruvian bank, while Banca Intesa of Italy will own the other 20%. While its expansion at home is limited by a ban on bank mergers, Scotiabank is increasing the number of households it does business with, particularly in wealth management, and plans to open 20 domestic branches this year. In February Scotiabank agreed to buy the mortgage business of Maple Financial for about $200 million.

Richard E. Waugh, president and CEO

www.scotiabank.com

UNITED STATES

CITIGROUP

Citigroup struggled in 2005 with rising US interest rates and a flatter yield curve, which compressed net interest margins, but the bank made up for this with significantly increased lending volume. Meanwhile, Citigroup continued to expand its leading global network, with branch openings or acquisitions last year totaling 68 in Mexico, 36 in the Philippines, 16 in Brazil and 15 in Russia. In Japan, Citigroup closed 80 branches last year and opened 170 new automated loan machines. Its private bank in Japan ceased operations at the end of September 2005 at the insistence of Japanese regulators. Last December Citigroup led a consortium that raised its bid for an 85% stake in China's Guangdong Development Bank to $3 billion. In capital markets, Citigroup was the leading investment bank in global equity and equity-linked underwriting for 2005. Its mergers and acquisitions advisory revenue rose 25% to a record. The bank's fourth-quarter 2005 earnings rose 30% to $6.93 billion, due in part to its sale of its asset-management business to Legg Mason. The earnings for the fourth quarter failed to meet analysts' expectations, however, and contributed to a sharp decline in the US stock market when they were released on January 20. A change in the US bankruptcy law caused a significant spike in consumer bankruptcies during the fourth quarter, but the bank said that underlying credit conditions throughout its businesses remained favorable.

Charles Prince, CEO

www.citigroup.com

AUSTRIA

ERSTE BANK

With controlling stakes in banks in leading Central & Eastern European economies such as Hungary, the Czech Republic, Croatia and the Slovak Republic, Erste Bank has the largest share of the Austrian banks in the CEE region based on total assets of euro28.6 billion. The CEE accounts for 21.9% of Erste's total group assets, and it boasts more than 1,200 branches, the second-largest number of banking outlets in the CEE region behind Italy's UniCredit. More importantly, it is well placed to capitalize on the growth of retail banking in CEE, with a 32% retail market share in the Czech Republic and, more recently, its winning bid for a 61.9% stake in Banca Comerciala Romana (BCR), which saw its market share in the region climb to 20%. Analysts anticipate that the acquisition will bolster the group's overall earnings following the record euro712 million net profit the bank made in 2005, including a 19% return on equity.