How have the stocks of the largest banks in the world fared since the crisis? Citigroup Inc. used to be the world’s largest bank in terms of market capitalization in June 2007, before the credit crisis surfaced. Its value has more than halved since and the top position is now held by Industrial and Commercial Bank of China (ICBC).
ICBC’s market cap has risen by 18.5% compared with June 2007, but what’s more interesting is that the value of State Bank of India (SBI) has risen by 26.5% during the same period. All the above calculations are based on market value in dollar terms. This makes SBI the top performing stock among large sized banks, which is despite a 20% depreciation in the rupee since June 2007. In local currency terms, the bank’s market value has risen by over 50%. In comparison, ICICI Bank Ltd, the second largest bank in the country, has seen a 10% drop in value in dollar terms and an 8% rise in local currency terms.
Graphics: Ahmed Raza Khan / Mint
Because of this large shift in the value of US’ largest bank and outperformance of the Indian banks, SBI’s market value relative to that of Citigroup has risen to 24% currently, up from just 8% in June 2007. The comparison tells us several things. The most obvious one is that banks in countries such as India and China have done better because they haven’t been holding the high level of toxic assets held by banks in developed countries.
The more important point, however, is that it seems to indicate that, contrary to the received wisdom, government-owned banks may not be such a bad thing after all.
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