Smaller Indian banks logged some of the highest total stock returns among Asia-Pacific peers in the three months ended June 30 on the back of a strong recovery in the country's financial sector and solid performance of its stock market.
Indian banks occupied nine slots in S&P Global Market Intelligence's ranking of 15 Asia-Pacific banks with the highest total stock returns in the second quarter, with Suryoday Small Finance Bank Ltd. leading the pack with total returns of 82.10%. Fellow Indian lender Ujjivan Small Finance Bank Ltd. secured the second position after logging total returns of 50.10%, while IDFC First Bank Ltd. came in third and The Karnataka Bank Ltd. came in fourth on the list.
"A strong recovery is underway in the Indian financial sector," S&P Global Ratings said in a June 26 report. "The banking system has unwound imbalances and sharply reduced the high stock of problem assets accumulated during the previous downturn."
The rating agency said it expects the Indian banking system to maintain its solid performance. Citing Indian financial institutions' strong financial metrics, S&P Global Ratings revised upward its banking industry country risk assessment (BICRA) for India to group 5 from group 6. The BICRA criteria evaluate and compare the relative strength of global banking systems. BICRA group 1 represents the lowest-risk banking systems and group 10 represents the highest-risk ones.
In addition, Indian banks' stock performance was in line with that of the country's stock market. The broader S&P BSE AllCap stock market index jumped 13.2% in the second quarter, while the banking S&P BSE Bankex index rose 9.7%.
The South Indian Bank Ltd., IndusInd Bank Ltd., RBL Bank Ltd., Fino Payments Bank Ltd. and Punjab & Sind Bank also made it to the best performing Asian banking stocks list with Japanese lenders SBI Sumishin Net Bank Ltd., Mitsubishi UFJ Financial Group Inc., Hirogin Holdings Inc., Kyushu Financial Group Inc., The First Bank Of Toyama Ltd. and Indonesia's PT Bank Jago Tbk securing the other slots.
Chinese banks accounted for seven of the 15 worst-performing Asia-Pacific bank stocks in the second quarter, Market Intelligence data shows. Zhongyuan Bank Co. Ltd. led the group with total returns of negative 27.50%.
Other Chinese banks on the latest ranking were Zhejiang Shaoxing RuiFeng Rural Commercial Bank Co. Ltd., Shengjing Bank Co. Ltd., Bank of Gansu Co. Ltd., Bank of Chengdu Co. Ltd., China Bohai Bank Co. Ltd. and Bank of Lanzhou Co. Ltd. They were joined by three banks from the Philippines, two each from Indonesia and Australia, and one from Japan.
Zhejiang Shaoxing RuiFeng Rural Commercial Bank Co.Ltd.China's GDP grew 4.5% year over year in the first quarter, against the government's 5.0% target for the year.
S&P Global Ratings on June 27 cut its growth forecast for China to 5.2%, from 5.5% in 2023, citing the country's slower-than-expected recovery post-COVID-19. Similarly, ING on July 6 revised its full-year 2023 GDP growth rate for China to 5.2% from 5.7%.