Top 25 publicly trading banks saw composite market capitalization decline of 24.5% in Q1, 2020

Amid the COVID-19 outbreak across multiple geographies, most of the top publicly trading banks by market capitalization (MCap) reported a quarter-on-quarter (QoQ) decline in their MCap for Q1 (ended 31 March 2020), according to GlobalData, a leading data and analytics company

In this period, the composite MCap of these banks slid substantially by 24.5% to US$2.3 trillion, losing around US$800bn – with the exception of the Bank of China, which reported 6.5% QoQ growth.

Within the top 25, Scotiabank’s MCap increased, raising it from 26th position to 19th, while BNP Paribas, Banco Bradesco, PNC Financial and Banco Santander saw lower MCap and did not achieve places in the top 25. Industrial Bank, PT Bank Central Asia and the Shanghai Pudong Development Bank all found places in the top 25, ranking 22nd, 23rd and the 25th, respectively, and JPMorgan Chase and HSBC maintained their positions.

The Bank of China was the sole bright spot in Q1, gaining three places (from ninth to sixth place), with an MCap of US$158.4bn at the end of Q1 2020, from US$148.5bn in Q4 2019. This was attributed to policy support from the Chinese Government and growth initiatives being pursued by the bank, including the opening of new branches and critical acquisitions.

Anindya Biswas, Company Profiles Analyst at GlobalData, comments: “The general downward trend of MCap in the top 25 banks reflects the gravity of the situation the global economy is facing. As of 31 March, 2020, both S&P 500 and Dow Jones closed down 20% and -23.2%, respectively, recording their worst ever first quarters.

“Developed economies such as Canada and the US have already declared a reduction in their policy rates to nearly to 0% and 1.25%, respectively, while the Bank of England reduced its base rate by 50 basis points from 0.75% to 0.25% and then to 0.1%.”

Banks in the Asia-Pacific (APAC) region are expected to experience a rise in their non-performing assets and a spike in the lender credit costs, despite change in the policy responses, which might bring down the creditworthiness of the banking sector in the region.

Biswas continues: “Although China was the epicenter of the COVID-19 outbreak not so long ago, the Chinese financial sector recovered well as the government stepped in to cut down the reserve requirement ratio. This enabled US$115bn to be released into the financial markets, alongside the selling of government bonds in the open market and the introduction of US$428bn to ensure that the banks and the economy in general did not face any major slump.”

Financial regulators worldwide are also preparing to face what could be the second great depression. Banks have been advised to use the buffer capital, which is well above the Basel minimum standards; encourage the use of their digitized products and services; and initiate loan modification to accommodate the temporary volatility.

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