Sri Lankan banks topped a list of lenders in the Asia-Pacific region with the best total stock returns for the first quarter, as bets grow that the worst for the South Asian nation's economy may have passed.
Hatton National Bank PLC, Sampath Bank PLC and Commercial Bank of Ceylon PLC logged the highest total stock returns among peers in the region in the quarter ended March 31, according to a list compiled by S&P Global Market Intelligence. Hatton National and Sampath posted total returns of more than 50%, albeit on the back of equally sharp declines earlier.
Sri Lanka's economy is improving after a balance of payments crisis triggered the nation's first default on its sovereign bonds in April 2022, requiring support from multilateral financial institutions. Still, the Asian Development Bank expects the country's economy to contract 3.0% this year, after a 7.8% contraction last year, and return to growth only in 2024, according to an April 4 press release.
Chinese banks Jinshang Bank Co. Ltd. and Bank of Changsha Co. Ltd. also made it on the list of top performers in the first quarter. Vietnam's Ho Chi Minh City Development Joint Stock Commercial Bank was seventh on the list.
Four Philippines-based lenders — BDO Unibank Inc., China Banking Corp., Philippine Bank of Communications and Bank of the Philippine Islands — were also placed in the list of top 15 Asia-Pacific bank stocks with the highest total returns. One bank each from Taiwan and Pakistan, as well as two regional Japanese bank lenders, made the list.
Some pressure on Asian banks has eased for now, as the challenges to the liquidity of some banks in the US appear to have abated and market confidence has stabilized. This could allow Asian central banks to base their monetary policy more on local factors.
Worst performers
Eight out of the top 15 Asia-Pacific bank stocks with the lowest total returns in the first quarter were Indian banks, swinging from their top performance in the region for the past two quarters. All the banks on the worst performers list were smaller lenders with a market capitalization of between $120 million and $3.84 billion, according to Market Intelligence data.
Indonesia's PT Bank Jago Tbk and PT Bank Bumi Arta Tbk were among the worst-performing Asia-Pacific bank stocks, in first and third position, with negative total returns of 33.33% and 29.79%, respectively. India's Yes Bank Ltd. took the second slot in the list, with negative total returns of 30.48%.
China's Bank of Guizhou Co. Ltd. and Bank of Qingdao Co. Ltd. also made the list of the worst-performing bank stocks in Asia-Pacific in the quarter.
The Nifty Bank index fell 6% in the three-month period ended March 31, compared with a decline of 4.6% for the Nifty 50.
Meanwhile, the S&P BSE BANKEX index, which comprises constituents of the S&P BSE 500 classified as members of the banks sector, also fell by 6.3% during the quarter. The Jakarta Stock Exchange Composite Index moved 0.67% lower as well during the quarter.
Despite decreasing stock returns, Indian banks' key credit measures are promising, with credit losses and nonperforming assets declining, higher interest rates boosting net interest margins and returns on average assets recovering toward decade high numbers, according to Geeta Chugh, an analyst at S&P Global Ratings. Meanwhile, major Indian banks' improved financial metrics and low exposure to the Adani Group supported their assertions that any fallout from the company's troubles would not cause any significant credit profile risk.
