The COVID-19 pandemic has led to a considerable instability in global capital markets, with a cascading effect on the banking sector. This is evident from the moderate growth in the consolidated revenue of the top 20 banks in Asia-Pacific (APAC). Against this backdrop, the banking giants from Japan and South Korea ended 2020 at the opposite end of growth spectrum, finds GlobalData, a leading data and analytics company.

An analysis of GlobalData’s Company Interim Reports Database reveals that the consolidated revenue of the top 20 banks in APAC grew by 1.8% from US$1,407.6bn in 2019 to US$1,432.8bn in 2020.

China continues to lead the list in terms of revenue with 13 banks, followed by Japan with three, South Korea with two, and one each from India and Hong Kong.

Industrial and Commercial Bank of China, which topped the list by revenue, reported an ordinary growth of 2.5%, based on higher interest on customer loans and advances, and investment. The remaining 12 Chinese banks too reported growth of below 10%.

However, South Korean banking giants Hana Financial Group and KB Financial Group reported a growth rate of above 10%.

Alisha Bajpai Singh, Company Profiles Analyst at GlobalData, comments: “Hana managed to post substantial growth in revenue on the back of improved interest income, fee income, and disposition/valuation income. Similarly, KB Financial posted higher fee and commission income, insurance income, and net gains on financial instruments at fair value through profit or loss, which helped it bolster its revenue stream.”

On the other hand, the devastating effect of the pandemic resulted in a double-digit decline in the revenue of all three Japanese banking giants.

Sumitomo Mitsui was the largest loser with a drop of 24.9% in revenue, due to the fall in interest income, trading income, and other incomes. Mitsubishi UFJ Financial Group’s revenue fell 14.7% due to the lower net trading profits, net other operating profits, and net gains on debt securities backed by increase in interest rates. Likewise, Mizuho Financial Group recorded a substantial decline of 13.5% in its revenue, caused by reduction in net trading income and other operating income.

HSBC also reported a substantial decline in net interest income, owing to weaker market interest affecting deposits from customers and reinvestment yields in Hong Kong. Lower net interest income from Malaysia, China, and Singapore aggravated the fall in revenue.

Ms. Singh concludes: “The COVID-19 pandemic has affected the wellbeing of the financial system globally. The economic crisis has been exerting pressure on the regulators to cut rates and announce stimulus packages to promote economic recovery. As the threat of the next wave looms large, non-performing loan portfolio can further expand globally. However, the shifting trend to digital banking is expected to improve the fortunes of the banking sector.”