Indian banks improve market cap in Q4 as investors chase world's fastest growth

Indian banks racked up gains in their market capitalization for the quarter ended Dec. 31, 2023, while Japanese megabanks saw their market caps decline even as the overall market experienced high investor interest last year.

HDFC Bank Ltd. led market capitalization gains among major Indian banks in the quarter ended Dec. 31, 2023, according to data compiled by S&P Global Market Intelligence. HDFC Bank's market cap increased 12.1% to $155.91 billion, cementing its position as India's largest bank, following its merger with parent Housing Development Finance Corp. Ltd. in July 2023.

Other large Indian banks also saw higher market caps. State Bank of India, the nation's top bank by assets, rose 7.3% to $68.84 billion, while ICICI Bank Ltd. gained 4.9% to reach $83.98 billion.

India's economy remains one of the world's fastest growing, according to the UN "World Economic Situation and Prospects 2024" report released Jan. 4. Domestic demand and investment are projected to push 2024 growth to 6.2%.

Meanwhile, Indian stocks are at an all-time high, with the BSE Small cap index hitting a fresh peak of 44,110.68 on Jan. 9.

The government forecasts 7.3% expansion for the fiscal year ending March. Nonperforming loans have fallen to a "multi-decadal low" of 0.8% in India, according to the nation's central bank. With improved margins and stable asset quality, Indian lenders are likely to attract more global investor funds seeking higher returns.

Japan's two megabanks, Mitsubishi UFJ Financial Group Inc. (MUFG) and Sumitomo Mitsui Financial Group Inc. (SMFG), saw declines in their market cap for the quarter. MUFG's market cap fell 4.8% to $102.96 billion while SMFG's market cap fell 6.6% to $64.94 billion.

The Japanese equity market saw gains in 2023 as foreign investment flowed into Japanese stocks. Goldman Sachs Research expects the equity market to rally again in 2024 due to the Tokyo Stock Exchange's company governance reform and solid global economic growth, according to a Nov. 22, 2023, report.

Japanese stocks have been the highest since 1990 as the Nikkei Stock Average rose 2.01% on Jan. 10 to close at 34,441, marking the second straight day of new highs since the collapse of Japan's asset price bubble economy, according to Nikkei Asia.

The megabanks' share prices peaked in September 2023, but an expected Bank of Japan (BOJ) monetary price hike may continue to help that share price rally. The BOJ has tweaked its yield curve control policy three times since December 2022; analysts see the tweaks as a precursor to an end to negative interest rates.

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Industrial and Commercial Bank of China Ltd., China's largest bank by assets, also remained the largest bank by market cap in the region in the fourth quarter. The bank's market cap rose 4.2% to $224.19 billion. Agricultural Bank of China Ltd. retained its spot as the second-largest bank in the region, with the bank's market cap rising 3.7% to $175.72 billion.

China Construction Bank Corp. fell down to fourth place in the list as its market cap came in at $151.92 billion. Bank of China Ltd. rounded out the top five largest banks by market cap in Asia-Pacific as its market cap increased 8.7% to $150.50 billion.

China Merchants Bank Co. Ltd. had the largest decline in market capitalization for the quarter as its market cap fell 16.2% to $96.92 billion, slipping to eighth place in the list.