Amid the rising global inflation and market volatility, the aggregate market value of the top 25 global banks by market capitalization (Mcap) tumbled by 6.7% quarter-on-quarter to $3 trillion during Q3 2022, finds GlobalData, a leading data analytics and research company.

Murthy Grandhi, Company Profiles Analyst at GlobalData, comments: “While ICICI Bank, Bank Central Asia, and Charles Schwab gained the most during Q3, China Merchants Bank and HSBC witnessed a heavy slump in MCap.”

ICICI Bank

ICICI Bank beat analysts’ expectations and reported net revenue and profit after tax of INR178.8 billion and INR69 billion in Q1 FY2023 over INR149.3 billion and INR46 billion in Q1 FY2022, respectively. Healthy growth in the loan books and improved asset quality enhanced the bank’s bottom line. An increase in net interest margin, high-yielding products, and cash-to-deposit ratio contributed to the share price rally.

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Bank Central Asia

Improved asset mix and solid current accounts and savings accounts (CASA) performance in Q2 2022 supported the rise in MCap by 15% over the previous quarter. Growth was propelled by improving business activities as well as the public mobility restriction relaxation.

Charles Schwab

Positive Q2 2022 results fuelled the share prices of Charles Schwab, which resulted in a 14% rise in MCap. A strong operating model resulted in a 31% rise in net interest revenue on the back of higher market interest rates and growth in interest-earning assets. Active brokerage accounts also increased 5% year-over-year to reach 33.9 million as of 30 June 2022.

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China Merchants Bank

Grandhi explains: “China Merchants Bank’s MCap slumped over 25% primarily due to its governance issues, wherein it sacked its president without offering a reason, even as the bank registered satisfactory results over the period in a challenging macro environment.

HSBC

HSBC’s MCap dropped by 21% on the back of A €33.6 million fine levied by the European Commission for its breach of EU antitrust rules by participating in a drug alliance in euro interest rate derivatives.

China’s Big Four banks

China’s Big Four banks—ICBC, Bank of China, Agricultural Bank of China, and China Construction Bank—each lost more than 10% in their MCap owing to a property sector-induced dent in consumer and business confidence. The Chinese regulator made several interest rate cuts due to mounting pressure placed on banks to disburse more loans to revive the property sector, which in turn could impact profitability.

Grandhi concludes: “Global banking segment could face greater difficulties in the fourth quarter of 2022 because of Credit Suisse’s crisis, which was brought on by the bank’s poor investments in Greensill Capital and Archegos Capital as well as scandals like drug-related money laundering, which damaged the bank’s reputation and undermined investor confidence and caused its share price to plummet.

“Additionally, its rate on credit default swaps increased, which suggests that it may file for bankruptcy. Given that Credit Suisse is regarded as a global systematically important bank (G-SIB), all these changes could have a cascading effect on the banking industry. Additionally, the continued increases in interest rates to combat inflation may trigger a possible worldwide recession.”