China’s big four banks saw growth although NIMs fell.

The market capitalization of the top 25 banks worldwide rose 5.4% quarter-on-quarter (QoQ) to $4.11t on the back of rising stock prices and a resilient US economy, reports GlobalData.

Bullish investor sentiment is driven by an expected interest rate cut by the Federal Reserve in September 2024, said Murthy Grandhi, a GlobalData company profiles analyst.

The US economy also showed resilience, with real GDP rising 2.5% in 2023 versus 1.9% in 2022. GDP is expected to grow by 2.1% in 2024, Grandhi said.

“Overall, investors remain optimistic about banking stocks as central bank rates in the range of 5.25-5.5% stabilize deposit costs, thus easing net interest margin pressure. A strong economy and an expected modest improvement in lending could offer a stable net interest income for banks,” Grandhi said.

China Construction Bank (CCB) and India’s HDFC Bank saw their stocks rise over 15% in the quarter that ended on 30 June 2024.

JPMorgan Chase retained its position as the most valuable bank for the ninth consecutive quarter. This reflects its resilient performance amid evolving economic landscapes, GlobalData said.

HDFC Bank gained 17% in market value in end Q2 and is now valued at $154.4b. Its strong Q1 results met investor expectations, and propelled rising optimism for its future performance.

“HDFC Bank is expected to reclaim its industry-leading profitability, benefitting from an improved loan mix and normalized funding costs,” GlobalData said.

The market value of China’s top four banks grew between 3% to 22% in Q1 despite declining interest earnings.

ICBC, Bank of China, the Agricultural Bank of China, and CCB all experienced a decline in net interest margins (NIM) for the quarter that ended in March 2024, GlobalData reported.

GlobalData blamed the lower NIMs on a reduction in the loan prime rate and low market interest rates.

CCB’s stock value surged 21.8% in Q2, after a strong Q1 performance that saw the Chinese bank reporting billions in increases to its gross loans and advances, financial investments, and deposits.

Gross loans and advances rose by CNY1.17t ($164.15b) compared to end-2023. CCB’s financial investments grew by CNY247.15b ($34.67b), whilst customer deposits rose by CNY1.71t ($239.91b.

The performance of global banks in the last six months of 2024 will be shaped by several factors, including economic conditions, monetary policies, and inflation, according to GlobalData.

“Geopolitical factors, including trade tensions and conflicts, could affect international operations and market stability,” Grandhi said.

Regulatory scrutiny, as seen with TD Bank, will also impact strategic initiatives and performance.

“Overall, whilst challenges remain, the combination of potential rate cuts, economic resilience, and technological progress may benefit global banks,” Grandhi said.