Pakistani banks' total returns surge in Q2 amid local stock rally

July 08, 2024 (MLN): Pakistani banks dominated a ranking of Asia-Pacific lenders with the highest total returns in the second quarter amid a strong performance of the country's stock market, according to S&P Global.

Pakistani banks occupied seven slots on S&P Global Market Intelligence's ranking of 15 Asia-Pacific banks with the highest total returns in the period between March 27 and June 28, Shahrukh Madni of the S&P Global wrote in a report.

Standard Chartered Bank (Pakistan) Ltd., Faysal Bank Ltd. and United Bank Ltd. ranked second, third and fourth, respectively, with total returns of 64.61%, 62.63% and 48.92%.

Vietnam's Lien Viet Post Joint Stock Commercial Bank topped the list with total returns of 68.36%.

Other Pakistani lenders featured on the ranking were Bank Al Habib Ltd., Allied Bank Ltd., Bank Alfalah Ltd. and Habib Metropolitan bank Ltd.

Overall, smaller banks dominated the ranking, with Japanese online lender SBI Sumishin Net Bank Ltd. having the highest market capitalization, at $2.86 billion.

"[The Pakistani government's] adoption of tight fiscal and monetary policies under the umbrella of [the International Monetary Fund], along with timely external payments amid a smooth transition of government, has led to the strong performance of the KSE-100," S&P Global quoted Awais Ashraf, director of research at AKD Securities Ltd, as saying.

The KSE-100, the benchmark index of the Pakistan Stock Exchange, rose over 17% between March 27 and June 28.

"We believe, entry into the larger IMF program amid monetary easing and increased foreigners' interest would boost investor confidence in equities," Ashraf added.

Investor sentiment on the Pakistani equities market has been bullish, driven by improvement in the inflation reading and the government's talks with the IMF for a larger bailout program.

Headline inflation in the country decelerated to 11.8% in May from 17.3% in April, the State Bank of Pakistan said in its June 10 monetary policy statement.

While the central bank reduced its policy rate by 150 basis points to 20.5% in June, the monetary policy stance remains tight.

In addition, five Japanese lenders featured on the list of banks with the highest total returns during the period — SBI Sumishin Net Bank, The First Bank Of Toyama Ltd., Chugin Financial Group Inc., The Akita Bank Ltd. and The Bank of Saga Ltd.

Japan has continued to experience strong foreign investor interest, and equities in the local stock market are on track to experience a record-breaking year should current trends continue, Invesco analysts said in an April 11 note to investors.

Manila-based Philippine Trust Co. also made the ranking, with total returns of 39.76%.

Worst performers

Led by PT Allo Bank Indonesia Tbk, six Indonesian banks were included in the list of 15 Asia-Pacific banks with negative total returns during the period. All Bank Indonesia topped the list, posting losses of 34.19% between March 27 and June 28.

The five other Indonesian banks were PT Bank Rakyat Indonesia (Persero) Tbk, PT Bank Negara Indonesia (Persero) Tbk, PT Bank Tabungan Negara (Persero) Tbk, PT Bank Nationalnobu Tbk and PT Bank Neo Commerce Tbk.

Nomura analysts said July 01 that Indonesia has the worst-performing stock market in Asia year-to-date, noting that the "index-heavy banks have been a drag."

Meanwhile, Thai Credit Bank PCL, South Korean digital bank KakaoBank Corp. and China's Shengjing Bank Co. Ltd. ranked second, third and fourth, respectively, with losses of 32.57%, 28.01% and 27.55%, Market Intelligence data shows.

Two banks from the Philippines and one bank each from Vietnam and Australia were also included in the list.

Indonesia's PT Bank Neo Commerce Tbk, which posted losses of 39.30% in the quarter ended March 31, occupied the 12th position on the latest ranking with negative returns of 18%.

Japan's Kyushu Financial Group Inc., which had the fourth-highest returns in the first quarter, posted negative returns of 16.63% in the succeeding three-month period.

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