(Ecofin Agency) - Since January 1, 2020, the cumulative market value of the world’s listed banks fell by $2,126.7 billion, according to data provided by Capital QI. In detail, a total of 1,601 banks experienced a decline in market value over the period under review while 192 saw an increase in their value and 50 others reported a stable value.
The top 30 largest banks by market capitalization, with U.S. JP Morgan Chase & Co on top of the list, did not escape this fall. As of June 26, JP Morgan Chase & Co reported a decline of 33.58% in its value. Though high, the loss of Chinese banks is less significant than the U.S. side. The biggest decline in China was reported by Industrial and Commercial Bank of China Limited (ICBC), whose value fell by 20.67% over the period. The other major Chinese banks present on financial markets posted a decline of less than 10%.
The global loss in value is linked to the fact that, overall, the turnover of big banks, which is closely linked both to the performance of the capital markets and to that of the global economy, is expected to decline in 2020. The International Monetary Fund has predicted a growth decline of around 8% for the developed economies where most of these banks are present. Subsequently, the recovery announced in 2021 (+4.8%) will not be enough to make up for the losses.
The coronavirus has put pressure on economic operators and governments that are clients of banks. The banks are forced to accept measures to restructure their loan portfolios or to make provisions for outstanding receivables. In both cases, there is a loss of income and shareholder value. Investment banking is also under pressure.
According to data provided by Refinitiv, Reuters' data service, global investment banking revenues reached $24.2 billion in Q1 2020, 7% down from Q1 2019. This is also the lowest level of revenue generated by the industry in a first quarter since 2016.
Investors see this situation as risk factors on their investments, or their profit objectives, which justifies a decline in the value of bank shares.