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Sunday, 22 October 2017

Review of the Year 2012

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Another year, another series of scandals and outrages in the banking industry.

For a time, it seemed senior bankers spent as much time testifying (often utterly incompetently, occasionally with breath-taking arrogance) in front of parliamentary and Congressional hearings as they did doing deals or navigating their institutions through the choppy waters that are the modern financial markets.

For the first time IFR seriously considered not awarding a Bank of the Year. But, in the end, we reached the conclusion that it would be unfair to those banks that have continued to behave properly in extremely trying circumstances.

It is our judgement that BNP Paribas is one such institution. The way the French bank reacted to the crisis that engulfed it in 2011 when US money-market funds refused to roll over funding was admirable. Finally, here was a bank in the middle of the storm able to respond with speed, ruthlessness and wisdom.

The bank is consequently in good shape for the future. It has gone through the sort of soul-searching about what it should be and what it should do that other, bigger organisations have put off time and again.

Just as importantly, BNPP is in a position to keep making a decent return for its shareholders. One of the criticisms of the banking industry that struck with most force in the aftermath of the financial crisis was that the industry had been captured by those who were supposed to be working on behalf of its real owners. Persistently tiny returns on assets and equity (at the same time as stubbornly high comp ratios) was Exhibit 1.

BNPP, on the other hand, has made money for its shareholders. Not only is its stock up 50% since the beginning of 2012, but its annualised pre-tax ROE in the corporate and investment bank is above 20%.

Those are important boasts, though the bank’s biggest challenge now will be to maintain those numbers as it begins to judiciously build again.

Other winners have much to be proud of too. It is through these awards that IFR recognises the finance industry’s ability to drive intelligent deal-making that benefits issuers, investors and the wider economy.

The industry is not perfect and still has much work to do to regain public trust, but as politicians, regulators and commentators are finally realising, finance is the very lifeblood of economies. Without it, the modern world can barely exist.

So finance is not just some necessary evil to be tolerated. It is not fashionable to say so – and after the past year that is understandable – but the efforts of the finance industry should be celebrated, in all their messy, creative and exuberant brilliance.

That’s what we hope these awards do.

To see the full digital edition of the IFR Review of the Year, please click here.

To purchase printed copies or a PDF of this report, please email gloria.balbastro@thomsonreuters.com

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