Amid rising inflation in the US and strained geopolitical scenarios, the aggregate market value of the top 25 global banks by market capitalization (MCap) tumbled by 14.4% to $3.2 trillion over March 31, 2022 (Q1 2022), finds GlobalData, a leading data analytics and research company.

Parth Vala, Company Profiles Analyst at GlobalData, comments: “The companies that declined the most included Charles Schwab, Bank of America, Commonwealth Bank of Australia, Wells Fargo, and JPMorgan Chase.”

Charles Schwab

Along with the macro-economic and geopolitical unrest, what further fueled the decline in market value of Charles Schwab was its weak Q1 2022 results. It reported lower revenue and net profit than that of the consensus estimates. The Fed’s interest rate hikes in 2022 to tame inflation also weighed on the company’s trading revenues, which fell to $963 million in Q1 2022, reporting a decline of around 21% over the corresponding period in 2021.

Bank of America

Bank of America beat analysts’ expectations and reported revenue and net earnings of $23.2 billion and $6.6 billion in Q1 2022, over $22.8 billion and $7.6 billion in Q1 2021, respectively. The bank’s profitability was affected due to a higher provision for credit losses. In addition, the bank’s trading division reported a 15% drop in sales & trading activities on account of lower FICC trading revenues, which was caused by the Fed’s policy revisions.

Commonwealth Bank of Australia

Commonwealth Bank of Australia’s market value slumped by 20.6% quarter-on-quarter (QoQ). Reserve Bank of Australia’s series of aggressive rate hikes to control inflation, which was perceived by many as catalyst for recession, could lead to a rise in bad loans. The move not only affected the Commonwealth Bank of Australia’s stock but also all other major Australian banks.

Wells Fargo

Wells Fargo beat earnings expectations with a net profit of $3.4 billion in Q1 2022, compared to $4.3 billion in Q1 2021 on the back of a lower provision for credit losses. On the other hand, the bank fell short on revenue estimates and posted $17.6 billion in Q1 2022, as compared to $18.5 billion in the corresponding period in 2021. The bank’s mortgage lending business was impacted by rising mortgage rates owing to the Fed’s hikes in interest rates.

JPMorgan Chase

JPMorgan Chase’s market value was down 17.8% QoQ as it missed its earnings estimates in Q1 2022, reporting net profits of $7.8 billion, as compared to $13.9 billion in the corresponding period in 2021, owing to higher credit loss provisions. The bank built a credit loss reserve of $1.4 billion, which was in line with the increase in interest rates, geopolitical tension, and a potential global recession. The bank also suspended its share-repurchase programs to help it meet regulatory capital requirements amid growing global uncertainties.

China’s Big Four banks

China’s Big Four banks—ICBC, Bank of China, Agricultural Bank of China, and China Construction Bank—seem to have copped well against interest rate hikes by central banks across the globe.

Vala concludes: “The second half of 2022 will bring more challenges to the global banking sector as further interest rate hikes are almost imminent to curb the spiraling inflation, which would in turn render a potential global recession.”