Four Indian entities among 20 largest Asia Pacific banks in Q3:S&P analysis

Four Indian lenders were among the 20 largest banks in the Asia-Pacific region in terms of market capitalisation in the third quarter of 2021, according to data compiled by S&P Global Market Intelligence.

HDFC Bank was ranked seventh with a market cap of $119 billion, which represented a quarter-on-quarter rise of 6.7 per cent. It was followed by ICICI Bank, which saw its market cap rise 11.2 per cent QoQ to $65.5 billion, helping it move up three spots to 12th.

State Bank of India climbed two spots to 17th on the list after its market cap rose 8.1 per cent to $54.5 billion. Kotak Mahindra Bank made it to the list after logging a 17.5 per cent gain in market cap, the highest on the list.

Elsewhere in the region though, the situation was grim. Most of the largest banks in China saw their market capitalisation fall further in the third quarter of 2021 amid a slowing economic outlook and loan worries at one of the nation’s biggest property developers.

With the exception of Postal Savings Bank of China, all other Chinese lenders in the top 20 logged QoQ declines in market cap in the quarter.

Most non-Chinese banks in the list saw improvements in their market cap during the quarter, however. Chinese banks have for months faced slowing loan growth and compressed interest margins amid a softening economic outlook and regulatory clampdown on excess leverage in the corporate sector.

In July, the International Monetary Fund (IMF) reduced its 2021 forecast for China’s GDP by 0.3 per cent to 8.1 per cent. S&P Global Ratings also revised its 2021 GDP forecast for the country to 8 per cent from 8.3 per cent. Some analysts say the ongoing debt crisis at China Evergrande Group could further hit the lenders' confidence.

“The performance of Chinese banks in the third quarter was mainly dragged by investors’ concern over the slowdown of China’s macro recovery, market sentiment curb amid regulatory crackdown, as well as contagious risk from the property sector,” said Bruce Pang, Hong Kong-based head of macro and strategy research at China Renaissance.

Pang, however, is optimistic that the last leg of the year will mean more opportunities for Chinese lenders, given the well-rounded improvements on asset quality, solid fee income growth, undemanding valuation levels, mutual funds’ potential increase of holdings to secure returns towards year end, partly eased pressure from regulatory turbulence, and the growth of total social financing expected to bottom in September.

In July, S&P Global Ratings said the return to normalcy from the Covid-19 pandemic may take longer for lenders in the Asia-Pacific region due to a slower rate of vaccination.

As of September, daily coronavirus cases remain high in several parts of the region and lockdowns remain in place for some jurisdictions. The rating agency believes the impact of ongoing and subsequent pandemic waves will be lower for high-income Asian countries with wide vaccination coverage. However, it still cut its outlook for most economies in the region and retained forecasts for India and Hong Kong.

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