Chinese banks risk losing momentum in market cap growth following US tariffs

Several large Chinese banks improved their market capitalization in the first quarter, a gain that looks shaky amid the global market turmoil.

Industrial and Commercial Bank of China Ltd. (ICBC), China Construction Bank Corp. and Bank of China Ltd. increased their market caps during the January–March quarter over the previous three-month period, according to S&P Global Market Intelligence data. China Construction Bank added 5.9% to its market cap, and Bank of China added 5.7%. ICBC gained 1.4% over the quarter following the government's announcement of a capital infusion into some state-owned lenders.

Agricultural Bank of China Ltd. was the only one of the big four mainland Chinese lenders to experience a 1.7% decline in its market cap during the first quarter, the data show. Led by ICBC, the four lenders are the world's biggest banks by assets.

Losing momentum

The lenders may experience a loss of momentum following US President Donald Trump's imposition of tariffs on key trading partners April 3. The tariffs include a substantial 34% tax on imports from mainland China, set to take effect April 10. The rate is the highest among Asian economies. The US also imposed a 25% tariff on South Korea and a 24% tariff on Japan, triggering a global stock market downturn.

"In the first quarter, the banking industry got support from expectations for capital infusion by the government," Yusuke Miura, a senior economist at NLI Research Institute who covers the Chinese economy. "That could be more than offset by the US tariffs, however."

On March 31, the finance ministry announced it would issue the first batch of special treasury bonds worth 500 billion yuan to "actively support" four state-owned banks — Bank of China, China Construction Bank, Bank of Communications Co. Ltd. and Postal Savings Bank of China Co. Ltd. — to replenish core Tier 1 capital.

Top gainers

Among the top 20 banks in Asia-Pacific, Industrial Bank Co. Ltd., based in mainland China, recorded the highest market cap gain, with a quarter-over-quarter increase of 12.7%, reaching $61.84 billion over three months. China Merchants Bank Co. Ltd. followed closely with a 10.8% rise, reaching a market value of $150.15 billion.

"There may be no more positive factors for the banking sector," Miura said. Now fears are growing that the US tariffs could hamper the economy, potentially increasing nonperforming loans for mainland Chinese banks and hurting their earnings, Miura said.

Japan's Mitsubishi UFJ Financial Group Inc. emerged as the third-largest market cap gainer in the first quarter, recording a 7.9% increase to $154.93 billion, driven by the Bank of Japan's interest rate hike in January. The central bank's third rate increase since March 2024 helped boost the megabank's stocks by 8.3% over the three-month period.

India's HDFC Bank Ltd. added 3.2% to its market cap in the first quarter, securing the fifth position among banks in the region. This change pushed Commonwealth Bank of Australia down to sixth place, as it experienced a 1.5% decline in its market cap.

Indonesia's PT Bank Central Asia Tbk experienced the largest market cap loss during this period, with a 12.1% decline, the data showed.

The list of the top 20 banks in Asia-Pacific by market cap included seven lenders from mainland China, three each from Japan, India and Australia, and two from Singapore.

As of April 8, US$1 was equivalent to 7.34 Chinese yuan.