New data presented by Buy Shares has revealed that 14 of the world’s largest banks cumulatively lost $635.33 billion in market capitalisation during the coronavirus pandemic.
Some of banking’s biggest names were found to have suffered huge losses, with America’s Wells Fargo down -56.26% in market cap, followed by Spain’s Banco Santander at -46.16%.
The data shows that the steepest decline occurred during February 2020, as fears surrounding the rapid spread of coronavirus gripped economies worldwide.
Not all financial institutions have suffered a similar fate, however, with Japan’s Mizuho Financial Group only down a comparatively meagre -11.33%.
Buy Shares’ figures demonstrate the immense strain that the banking industry was put under during the pandemic, with the financial sector’s near-paralysis leading to heavy falls in market capitalisation.
The notable drop in February goes a long way to explaining the responses of the financial sector as the pandemic began to spread.
Even though coronavirus was first reported by China in December 2019, the lack of information meant it was difficult to predict how disruptive and widespread the infection would turn out to be.
Intervention from central banks in February nonetheless helped to cushion the blow, with the easing of restrictions on liquidity and capital helping to see thousands of institutions through the enormous burden of lockdown measures.
Buy Shares’ warned, however, that although the efforts of governments to keep economies afloat were beneficial to the banking sector, banks “still face some immediate pressures on their capital and liquidity position”.
The fact that the pandemic is by no means over just yet leaves the entire sector juggling with extreme uncertainty; the length and severity of the disruption is still not entirely clear, and it is hard to plan around an infection which always seems to be one step ahead.
Overall, the data indicates that most financial institutions will struggle to generate a profit over the course of 2020, largely due to the sustained period of low-interest rates implemented by big banks such as the Bank of England.
Despite this grim warning, Buy Shares’ figures demonstrate how the pandemic accelerated the shift towards digital banking. Customers and colleagues alike shared concerns over the hygiene implications of handling physical money, which meant more people than ever switched to their mobile and online-based banking systems.
The pandemic also provides a unique opportunity for challenger banks to grow their stake in the market, with traditional banks facing growing competition from sleek and savvy online institutions, who have enjoyed a spike in consumer interest during lockdown.
Buy Shares concluded their report with a message for the industry as a whole, as the challenges ahead begin to take shape:
“Banks will need to adapt to a new customer norm with new business models as well as rethink what drives brand loyalty. Restructure the addressable market to grow beyond the core. Most importantly banks will need to validate long-standing business assumptions. Long-held assumptions that have underpinned the banking business model may vary”.