2 Japanese megabanks lead Asian peers in Q2 market cap gains

Japanese megabanks Mitsubishi UFJ Financial Group Inc. (MUFG) and Sumitomo Mitsui Financial Group Inc. (SMFG) led Asia-Pacific peers, posting the largest gains in market capitalization in the quarter ended June 30.

Asset sale overseas and a stock rally at home played a key role in their strong performances.

MUFG retained eighth position on S&P Global Market Intelligence's ranking of Asia-Pacific's 20 largest banks in the second quarter, after its market cap surged 27.45% from the first quarter to $88.57 billion as of June 30. SMFG's market cap increased 14.8% quarter over quarter to $56.83 billion, helping it climb one notch to 14th on the list.

MUFG's share price jumped 46% year over year as of June 30, "benefitting from the closing of the sale of its U.S. Union Bank, which will improve the bank's cost-income ratio going forward and lower risk-weighted assets, along with its surprising strong dividend guidance," said Michael Makdad, a senior analyst at Morningstar. SMFG's share price soared likely due to the weaker yen, triggered by higher US interest rates, thus boosting its overseas profits, Makdad said.

The increase in the banks' stock prices was also in line with a stock rally in Japan. Through July 4, the Nikkei 225 index has surged 28.07% in 2023, while the Tokyo Price Index (TOPIX) has risen 21.92%. The Nikkei 225 measures the performance of 225 large companies in Japan, while TOPIX tracks all domestic companies of the Tokyo bourse's Prime market division.

Indian banks join the party

Indian banks' market cap improved in the second quarter as they benefited from strong balance sheets and the country's economic growth prospects. Driven by a 5.93% increase in its market cap, HDFC Bank Ltd. rose to fifth spot from seventh in the ranking. State Bank of India, the country's largest bank by assets, climbed to 12th position from 14th after recording a 9.37% quarter-over-quarter increase in its market cap to $62.30 billion.

"The Indian banking system has gone through its fair share of cycles but we do believe that, today, bank balance sheets are far stronger than they have been compared to the last few years," said Krishnan Sitaraman, senior director and deputy chief ratings officer at CRISIL Ratings, an S&P Global company. "And this is clearly borne out by trends in multiple parameters."

India's central bank expects the country's economy to grow 6.5% in the fiscal year that started April 1, following a 7.0% expansion in the prior fiscal year.

Citing Indian banks' improved performance and strong financial metrics, Sitaraman said they are "clearly on a stronger footing now compared with the past few years, and this is allowing them to focus on core business areas and growth."

Chinese banks at the top

Chinese banks remained the largest Asia-Pacific banks by market cap in the quarter, with Industrial and Commercial Bank of China Ltd. retaining the top slot with $225.49 billion in market cap as of June 30, according to Market Intelligence data. Agricultural Bank of China Ltd., China Construction Bank Corp. and Bank of China Ltd. occupied the rest of the top four positions.

Chinese banks made up eight of the top 20 slots in the list, despite three banks — China Construction Bank, China Merchants Bank Co. Ltd. and Industrial Bank Co. Ltd. — recording declines in market cap in the quarter.

Australia's four biggest banks made the top 20 list in the second quarter, with Commonwealth Bank of Australia climbing one notch to the seventh position with a market cap of $111.96 billion. ANZ Group Holdings Ltd. moved up to 19th place as its market cap improved 3.41% to $46.93 billion. National Australia Bank Ltd. dropped two notches to 15th after its market cap fell 4.82% to $54.94 billion. Westpac Banking Corp. retained 18th spot.