Which banks will weather the storm?
The Euromoney guide to emerging-market banks
Euromoney's formula for calculating its second emerging market bank (Emba) credit rating used the following eight variables: total assets to net loans, non-performing loans to gross loans, return on average assets, overhead costs to net income, deposits to net loans, disclosure, inflation and operating environment. The first six of these were taken from BankScope, a product of rating agency FitchIBCA. Inflation was factored in using the IMF's 1997 comsumer price index figures. The operating environment was allowed for by using Euromoney's country risk ratings (see September issue). Although the Emba ranking aims to ignore sovereign risk, this element was included to account for financial system strength, quality of regulation and economic outlook in a bank's home country.
The table shows banks with total assets over $1 billion based on 1997 and, in a small number of cases, 1998 figures. 1996 data were not used. Raw figures for the above eight variables were replaced by decile rankings to give consistent numerical values, the sum of which produced an overall score for each institution according to a multiple regression formula. These scores were compared with Moody's financial strength ratings using the following scale: A = 9, B+ = 8, B = 7, C+ = 6, C = 5, D+ = 4, D = 3, E+ = 2, E = 1.