06 May 2021
Posted in Banking
Banks back on track as market value growth picks up pace in Q1 2021, says GlobalData
The top 25 global banks* picked up from where they left off in Q4 2020 (ended 31 December 2020) and reported 15.6% growth in their aggregate market values in Q1 2021 (ended 31 March 2021), says GlobalData, a leading data analytics and research company. The aggregate market cap of the banks increased to $3.8 trillion from $3.3 trillion in Q4 2020, with all reporting quarter-on-quarter (q-o-q) growth in their market values. In addition, 15 of the banks posted more than 15% growth, of which ten were US banking giants.
Parth Vala, Company Profiles Analyst at GlobalData, comments: “In light of the recent stress test results, the Federal Reserve’s (Fed) decision to allow larger US banks to carry out limited share repurchases and divided payouts in Q1 2021 acted as catalysts for the growth. Further, all the limits imposed are expected to be lifted by Q2 2021 for most of the US banks.”
The most notable performers that have shown growth of over 20% were Wells Fargo, Bank of America, Goldman Sachs, Charles Schwab, Mitsubishi UFJ, and Truist Financial.
Vala added: “Wells Fargo has been suffering from the assets cap imposed by the Fed since its fake-accounts scandal, which has been hindering its growth. However, the Fed’s acceptance of its proposal to overhaul its risk management and governance model – the second of the four steps required before the imposed asset cap can be lifted – came as a big relief and brought cheers from the market.
“Bank of America’s 27.3% q-o-q growth in market value is likely attributed to better-than-expected earnings results; the authorization of a $25bn stock repurchase plan, including $2.9bn in Q1 2021; and the prospect of a possible lifting of all limits on dividend payout and share buybacks by the Fed by Q2 2021.
“Goldman Sachs has added nearly 24% to its market value in Q1 2021. The investment banking giant has been beating estimated results for the past three quarters mainly due to growth in investment banking and market-making activities. The two businesses reported annual revenue growth of 34.5% and 53.1%, respectively, in 2020.
“Charles Schwab continued to be one of the top performers in Q1 2021 as it posted 23.3% q-o-q growth in market value. Having outperformed both revenue and earnings estimates in Q4 2020, the firm’s high-profile acquisition and integration of TD Ameritrade – which enabled it to expand its client assets portfolio over $6 trillion – combined with growth in its asset management business bodes well for the firm.
“The commencement of vaccinations in Japan in February 2021 is expected to bring rapid improvement to corporate profits and economic growth, which resulted in a stock market rally. Revised annual earnings targets from JPY600 billion to JPY750 billion for MUFG Bank also helped Mitsubishi UFJ achieve impressive growth in its market value.
“Truist Financial has beaten earnings estimates for the past four quarters and it continued this trend as it beat q-o-q and y-o-y revenue and earnings consensus estimates for Q4 2020 on account of growth in non-interest income and decline in loan loss provisions.”
Compared to its US counter parts, the top Chinese banks have reported slightly moderate growths in their market caps as they have taken a hit in profitability as a policy measure to facilitate cheap loans to small businesses to support them in the time of crisis.
* Top 25 banks by MCap