Global Top 100 Banks Lag Behind Capital Market Recovery

The ongoing uncertainty about the economic impact of the Covid-19 crisis, falling interest rates and new money-laundering allegations delivered renewed pressure on the banking industry, leaving the world’s largest banks behind the global capital market recovery.

According to data presented recently by BuyShares, the market capitalization of the global top one hundred banks slumped by €300 billion in the third quarter of the year, falling from €4.1 trillion in June to €3.8 trillion in September. In the first quarter of 2019, the market cap of all banks worldwide amounted to €7.1 trillion, revealed Statista and BankingHub data. By the end of the year, this figure jumped by 7% to €7.6 trillion.

However, the Covid-19 pandemic delivered a huge hit to the global banking industry, causing its market cap to drop by 30% year on year to €4.9 trillion in March, the lowest quarterly value since the 2008 financial crisis. The following months witnessed recovery with the market cap of all banks worldwide rising to €5.3 trillion by the end of June. Nevertheless, this figure dropped to €5.2 trillion  in September, a 27.5% plunge year-on-year.

The BankingHub data showed the market cap of the top one hundred  banks amounted to €5.6 trillion in December 2019. After the stock market crash in March, it slumped by 30% to €3.9 trillion. Although the world’s largest financial institutions were able to make up their losses between April and June, their recovery stopped in the third quarter of the year and hit a new low point of €3.8 trillion, a 28% plunge year on year.

The BankingHub data also revealed that the global top one hundred  banks showed the lowest total shareholder return (TSR) performance across all industry sectors in quarter three of  2020, falling by 1.7% quarter-over-quarter. In comparison, the technology sector rose by 13.4% in the same period.

While the US banks were able to keep the total shareholder return at almost constant in the third quarter of 2020, the European banks witnessed an 11.7% decline quarter-over-quarter, reflecting the ECB’s’ extended dividend ban for eurozone banks. Statistics show Banco Santander, Societe Generale, Banco Bilbao Vizcaya Argentaria, and HSBC have been the hardest hit, with their TSR falling by 26.4%, 23.5%, 22.6%, and 20.4%, respectively.

The Yahoo Finance data also showed that Banco Santander witnessed the largest YTD market cap decrease among the largest European banks, falling by 38% to $38.5bn. UK’s HSBC lost nearly $60bn in market cap since the beginning of the year, the second-largest drop in Europe.

Although the leading US banks performed well in the third quarter, their market cap still remained below 2019 figures. As the leading bank globally, JP Morgan Chase witnessed a 19% YTD drop, with the combined value of its shares falling from $429.9 billion in December 2019 to $345.6 billion last week. The market capitalization of the Bank of America, the second-largest financial institution in the United States, rose to $233.6 billion last week, still 25% below the December figures.

Statistics show Wells Fargo witnessed the most significant market cap plunge among the top three US banks, with the figure falling by 55% YTD to $99.5bn. Industrial and Commercial Bank of China, China Construction Bank and Agricultural Bank of China witnessed 13%, 10%, and 8% YTD market cap drop, respectively.