A Tectonic Shift In The Global Banking Industry!

It is said that a picture is worth a thousand words.

Well below are some stirring graphs that highlights on the unexpected changes arising from the recent global financial crisis.

As the old saw goes, in every crisis there are opportunities. In the present case, we seem to witnessing an evolving transition to a new order in the global financial industry.

All graphs from Financial Times...

At the topmost window, the market cap of banks as % of the GDP of key developed nations depicts of a "leveling"-where the pecking order of market cap erosion have been heaviest in UK, followed by Europe, the US and Japan. This has led to nearly a congruous distribution of market cap as a ratio to GDP as the crisis evolved.

The next chart ("What difference a decade makes") is THE revelation: China has snatched the banking industry's leadership (lowest chart) from what used to be a stranglehold of the West (upper pane)!

And for a better visual, FT.com provides a great comparative breakdown of the top financial companies of the world in 1999 and in 2009...

The above had been the ranking of top global financial institutions based on market capitalization in 1999...

And the radical transformation seen in the present ranking.

As Peter Thal Larsen and Simon Briscoe wrote at the Financial Times, (bold highlight mine) ``New names have meanwhile arrived as if from nowhere. This is partly a reflection of shifting economic power: China’s three big banks dominate the rankings after joining the stock market in 2006 and 2007. Australian and Brazilian banks have also risen to prominence. But the shifting composition also offers evidence of how well different countries have managed their financial systems. Canada, for example, has been praised for its risk-averse approach to regulation. A decade ago, no Canadian bank made the list. Now there are five in the top 50."

So aside from China we have major commodity producers sharing the honors or a wider distribution of financial leadership.

But where will the next best growth area be?

Based on Boston Consulting Group's investment banking model, we will likely see a shift in the leveraged based business model to one of stabilizing profitability through a return to a simpler smaller model, smaller profit pools, greater client demand for simpler financial solutions and specialized capabilities of individual investment banks in an environment of increased regulatory and governmental influence.

And the region, as illustrated above, which has the least increase in government intervention could likely benefit most.

Combined with many other fundamental factors as high savings, growing middle class, demographic trends, urbanization and etc..., Asia looks likely a winner!