The largest U.S. banks increased capital levels in the first half of the year, maintaining their stronger equity capital and stronger price-to-book value than their foreign counterparts, according to data released Tuesday by Federal Deposit Insurance Corp. (FDIC) Vice Chairman Thomas M. Hoenig.
“Competing from a stronger capital position is paying off for U.S. banks,” said Hoenig in a statement. “The data show that the stronger equity capital position of U.S. banks, as compared with their lower-capitalized competitors around the world, is reflected in their higher price-to-book. U.S. banks have demonstrated that they can strengthen their leverage ratios and attain more sound levels of capital while remaining the most competitive and profitable in the world.”
In a release, FDIC said that the average International Financial Reporting Standards (IFRS) tangible leverage ratio – a measure of equity funding a bank’s assets for U.S. “Global Systemically Important Banks” (GSIBs) – increased to 6.62% equity-to-assets at June 30, up from 6.28% at yearend 2016, according to the semi-annual update of the Global Capital Index (GCI). FDIC said that compares very favorably to most foreign banks reported in the GCI.
(The IFRS measures a firm’s tangible equity (loss-absorbing capital) against a more complete reporting of derivative exposures, according to FDIC.)
The statement also noted that U.S. GSIBs continued to trade at a premium, and said that has increased as their capital position has strengthened, reporting a price-to-book ratio of 1.28% over the past six months from a discount to book of 0.90% a year earlier. European GSIBs traded at discount to book of 0.81% and Asian GSIBs were at a discount of 0.72%.