Why You CANNOT Ignore the Rest of the World

Even if you don’t bank or invest overseas, the health (or lack thereof) of banks around the world can have a big impact on your money and your investments. That’s why I’ve asked my colleague Gene Kirsch, senior banking analyst at Weiss Ratings, to share some timely information with you on that topic today. — Mike

By now you’re probably sick and tired of hearing about the global market turmoil in the European Union with Greece, Spain and Italy monopolizing the headlines. As Mike wrote just last week, “If it seems like the European debt crisis has been going on forever, that’s because it has!”

On top of that, growth is slowing in China and other Asian markets. But even that is starting to become old news as well. You may be wondering, isn’t there something new and more-exciting for the financial press to focus on?

Although you might take an interest in the goings-on in these other parts of the world, you could very well have the attitude that it doesn’t directly affect you. But there’s a good reason why troubles overseas occupy a significant chunk of real estate in the media … and will continue to do so.

That’s because, like it or not, the United States is tied to other economies. You can clearly see that in the list below showing our top 10 largest trading partners (total trade for all goods — through April 2012):

And since the financial markets facilitate trade and business all over the world, problems in other countries can severely impact your investments, your job and even how much you pay for everyday items. Therefore, you cannot afford to ignore the health or strength of other countries’ financial systems and their banks.

In response to demand for more international news on global banks and our successful launch of Sovereign Debt Ratings last spring, we launched Weiss Global Bank Ratings this year to identify the winners and losers in the great global banking crisis taking place right now.

This proprietary service by Weiss Ratings gives our global bank ratings on the 200 largest publicly traded bank holding companies in the world, including 16 in the United States.

Of the U.S. top 10 trading partners noted above, six of the nine regions are represented in the global ratings. Thus, you’ll have the importance of those ratings to our economy.

In total, the Weiss Global Bank Ratings are represented by 43 countries and nine regions including the European Union, euro zone and non-European Union regions in Europe. Of the countries with at least two rated banks, the top five and bottom five countries are:

Two of the 10 top trading partners are on the top/bottom lists noted above. U.S. banks rank as the 13th-strongest based on its 16 largest banks that made the list.

While some minor differences do exist between the global banks’ ratings and the domestic U.S. banks’, the ratings are based on a similar model format consisting of five weighted indexes: Capital, Asset Quality, Profitability, Liquidity and Stability.

The global model rates the entire holding company, which may consist of several related bank entities in many different countries, while our domestic bank ratings are based on the individual banking entity or operating company.

Thus, some similar bank names in the U.S., like JPMorgan Chase or Bank of America, may have different ratings in each model.

Listed below are the top five and bottom five banks as rated in our global bank model; including country of origin, their stock ticker symbol (U.S. and foreign markets), current stock price and one-year rate of return:

Five Healthiest Global Banks

Click the table for a larger view.

Five Weakest Global Banks

Click the table for a larger view.

The tables give a sample of the correlation of financial strength rating and the one-year stock return. So this tool could give you a good idea of where to invest, and what to avoid!

To get the full story on the global banking crisis that’s currently under way, and learn how to turn these troubles into potentially huge profit opportunities, be sure to get your copy of Weiss Ratings’ latest report, Winners and Losers in the Great Global Banking Crisis of 2012-2013, by clicking here today.

Best wishes,

Gene