Global banking sector sees little impact from US regional banking crisis

The aggregate market capitalization (MCap) of the top 25 global banks fell by 2.5% to $3.2 trillion quarter-on-quarter (QoQ) during the first quarter (Q1) ended on 31 March 2023. This reflects that the markets are still volatile owing to rising global inflation coupled with the US regional banking crisis. However, the global banking sector witnessed little impact from the regional banking crisis in the US, says GlobalData, a leading data analytics and research company.

Murthy Grandhi, Company Profiles Analyst at GlobalData, comments: “Banks that gained the most during Q1 included UBS Group, HSBC, Agricultural Bank of China. Postal Savings Bank of China, Bank of China, and Bank Central Asia. Charles Schwab, Bank of America, and Wells Fargo witnessed a drop in MCap.”

UBS Group

UBS Group’s positive 2022 results coupled with the acquisition of beleaguered Credit Suisse fuelled the share price, which resulted in a 13.4% rise in its MCap.

HSBC Holdings

Strong growth in revenues in FY2022, supported by the performance in all divisions and cost discipline, coupled with a reshaped portfolio including exits from US mass market retail, the planned sale of France retail, Canada banking business, and Russia and Greece operations, resulted in a 9.9% increase in its Mcap to US$135.9 billion.

Bank Central Asia (BCA)

Positive FY2022 results pushed up the share prices of BCA, leading to a 6.5% rise in MCap. The bank reported an 11.5% increase in its net revenue of IDR87.5 trillion, supported by a healthy CASA balance and loan portfolio.

Murthy Grandhi comments: “Charles Schwab’s MCap fell by 37.9% majorly due to negative investor sentiment as its massive bond holdings of longer maturities created fear of another crisis despite enough liquidity in the form of US$40 billion of cash and equivalents and a low loan-to-deposit ratio. Bank of America and Wells Fargo faced a MCap decline of 13.9% and 10.3%, respectively, due to selloffs owing to the regional banking crisis.”

China’s Big Four banks

China’s Big Four banks—ICBC, Bank of China, Agricultural Bank of China, and China Construction Bank - gained between 4-8% in MCap owing to less exposure to the global banking industry coupled with a recovery in lending from the Covid-19 pandemic.

Grandhi concludes: “Challenges the global banking sector may take the form of higher interest rates, inflation, and slower economic growth in the coming quarters of 2023. Net interest margin expansion will be smaller than previously anticipated, and volumes will be lower due to tighter credit conditions.”