Japanese banks total returns soar in Q1 on record stock rally

Small Japanese banks posted some of the highest stock returns among their Asia-Pacific peers in the quarter ended March 31.

Japan-based banks benefited from a stock rally that saw the benchmark Nikkei 225 index set new record highs. The country's lenders occupied six slots on a list of 15 Asia-Pacific bank stocks with the highest total returns in the first quarter, with internet lender SBI Sumishin Net Bank Ltd. posting the highest returns of 89.96%, S&P Global Market Intelligence data shows. Rakuten Bank Ltd., Kyushu Financial Group Inc. and The Chiba Kogyo Bank Ltd. rounded out the top 5 on the list, filling the slots behind second-placed Vietnam Technological and Commercial Joint Stock Bank.

Resona Holdings Inc., in 14th spot, was the only Japanese bank on the list that boasted a market capitalization of more than $10 billion, with the remaining five having market caps ranging between $410 million and $3.56 billion, the data shows. Seventh-placer The Hachijuni Bank Ltd. was the other Japanese bank to make the top 15.

Japanese stocks have enjoyed a rally for quite some time now, with the Nikkei 225 index adding more than 20% in the first quarter. The Tokyo Stock Price Index, rose about 17% in the three-month period to close at 2,768.62 on March 29, the last trading day of the quarter.

Analysts believe that there is further room for Japanese equities to climb.

Attractive valuations, Japanese households' strong cash deposits and the Bank of Japan's decision to gradually normalize its monetary policy could drive the country's equities up, Kristina Hooper, Invesco's chief global strategist, said in a March 19 note.

Despite a strong stock rally, "the valuation of the MSCI Japan Index is still low at a trailing price-to-earnings (P/E) ratio of 16.35 relative to other major indices such as the S&P 500 Index at 22.93," Hooper said. "In addition, the dividend yield on the MSCI Japan Index is 1.99%, well above that of other major indices such as the S&P 500 Index at 1.4%."

Four banks from India, two from Vietnam and one each from South Korea, Indonesia and Pakistan also featured in the top 15 of the first-quarter ranking.

Worst performers

Five banks each from Indonesia and India appeared on Market Intelligence's list of the 15 Asia-Pacific bank stocks with the lowest total returns in the first quarter. Two banks each from Bangladesh and mainland China and one from Japan made up the remaining slots.

Indonesia's PT Bank Neo Commerce Tbk posted the lowest total returns of negative 39.30%, followed closely by peers PT Bank QNB Indonesia Tbk and PT Bank Pembangunan Daerah Banten Tbk, with negative returns of 36.59% and 32%, respectively.

The five Indian banks on the list included Bandhan Bank Ltd., Ujjivan Small Finance Bank Ltd. and DCB Bank Ltd.