Return on assets - Country rankings

Definition: Commercial banks’ pre-tax income to yearly averaged total assets. The numerator and denominator are first aggregated on the country level before division. Note that banks used in the calculation might differ between indicators. Calculated from underlying bank-by-bank unconsolidated data from Bankscope.

What explains the differences between countries

As one can see from the rankings, many of the banking systems with a high level of return on assets are not in the most advanced economies. The reason is that these financial systems are generally small and are usually dominated by a handful of banks. Competition between banks is not very strong. The banks also often fulfill state mandates on lending and receive support. Such institutions can be profitable despite being not very efficient. Therefore, while the overall economy may be underdeveloped, the few banks that serve it may actually have a decent ROA. In larger, more competitive banking systems, profits decline as banks compete for clients on the deposit and the lending side of the market.