Page 91 - Monocle Quarterly Journal Vol 1 Issue 1 Q4

Something Wicked This Way Comes
BY DAVID BUCKHAM
For the past sixty-one years, Fortune magazine has published a list of the largest 500 rms in the world. An idiosyncrasy of the list is that it is published in order of revenue, instead of pro t or total
assets. It will come as no surprise that in the 1st of August 2016 edition, Apple comes out as the most pro table rm in the world, achieving an incredible pro t after tax margin of 23 percent on revenue of USD 234 billion.
What may surprise some is that the next four positions – by pro t – are occupied by four companies in the same industry, from the same country. Amazing as it may seem, these positions are occupied by Chinese banks. e total pro t after tax reported by the four largest Chinese banks in the same edition, is in excess of USD 136 billion.
To put this into perspective: the total pro t of the largest four US banks is only USD 80 billion. A modicum of legwork will divine the following: JP Morgan came in sixth with USD 24 billion, Wells Fargo came in eighth with USD 23 billion, Citigroup came in thirteenth with USD 17 billion, and nally Bank of America came in seventeenth with USD 16 billion.
Putting aside the niggling doubt that must infect one’s perception when comparing American rms to Chinese rms – for example, one has to ignore the fact that China is an autocracy, is notoriously opaque, and is prone to excessive government intervention – it still seems a legitimate pursuit. Given that these numbers are reported as accurate income and balance sheet gures by these rms, there is no reason not to compare them, irrespective of whether what emerges is sensible. In fact, merely by reporting them in a list, gives these numbers a certain degree of validity.
It does seem more than innocuous however, and somewhat incredible, that the four largest Chinese banks made nearly double the pro t of the four largest US banks. US GDP, ending Q3, 2016 is reported as USD 18.4 trillion and Chinese GDP is reported as USD 10.9 trillion.
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