Top 10 banks in the world by market capitalization as on Feb 26, 2009

The top 10 banks in the world by their market value as on yesterday (Feb 26, 2009) are presented in this article. The top three slots are occupied by banks from China. The other banks in top 5 are HSBC of UK, and American bank JPMC, the two being very close in market value.

In the top 10 list four banks are from China, two from US and one each from Italy, Japan, Spain and UK.

	Bank	Country	Mkt Cap bil. USD
1	ICBC	China	169.6
2	China Construction Bank	China	118.4
3	Bank of China	China	103.2
4	HSBC	UK	91.4
5	JP Morgan Chase	US	90.0
6	Wells Fargo	US	62.6
7	Banco Santander	Spain	53.6
8	Mitsubishi UFJ Financial	Japan	52.5
9	Bank of Communications	China	34.6
10	Intesa Sanpaolo	Italy	31.8

Because of the financial crisis the market capitalization of most of the US banks has eroded heavily leaving only two banks from the country in the top 10 valued banks of the world. The top 10 banks at the end of previous year (Dec, 2008) as mentioned in an earlier article had three US banks.

	Bank	Country	Mkt Cap
1	ICBC	China	173.9
2	China Construction Bank	China	128.3
3	JP Morgan Chase	US	117.7
4	HSBC	UK	115.2
5	Bank of China	China	98.2
6	Wells Fargo	US	98.0
7	Banco Santander	Spain	75.0
8	Bank of America	US	70.6
9	Mitsubishi UFJ Financial	Japan	70.1
10	BBVA	Spain	45.1

The market value of Bank of America had fallen to 28.6 billion USD (26 Feb '08) from 70.6 (31 Dec '09) and falls short of top 10. The last two months have not been good for the equity markets and the bear market started in 2008 is continuing. The banks in the developed countries are most hit with many of them falling more than 20% in last two months.

	Bank	Mkt Cap 26 Feb '09	Mkt Cap 31 Dec '08	Change
	ICBC	169.6	173.9	-2.5%
	China Construction Bank	118.4	128.3	-7.7%
	Bank of China	103.2	98.2	5.1%
	HSBC	91.4	115.2	-20.7%
	JP Morgan Chase	90.0	117.7	-23.6%
	Wells Fargo	62.6	98.0	-36.1%
	Banco Santander	53.6	75.0	-28.6%
	Mitsubishi UFJ Financial	52.5	70.1	-25.2%
	Bank of Communications	34.6	34.6	0.1%
	Intesa Sanpaolo	31.8	44.1	-28.0%

The Chinese banks have been able to resist the fall and the China Construction Bank was the worst hit with a 7.7% decline in value.

Logos:

Deflation in Japan may lead to a deeper recession

The economic woes for Japan, world's second largest economy after US, had deepened with the GDP for the last quarter of 2008 falling sharply, down by 3.3% from previous quarter and 12.7% annualized. This is the sharpest decline since 1974 oil crisis. This was the third consecutive quarterly decline in GDP. Japan has high dependence on exports and because of ongoing financial crisis in the US and European countries exports have fallen considerably.

Japan has been facing tough economic situation since more than a decade. It had seen consistent deflationary periods from 1999 to 2006. However GDP growth had picked up since 2003 and stood at a decent 2% in 2007. The year 2008 saw a fall in growth rate to 0.3% and in 2009 it is expected to be -2% (JCR projections).

The fall in global commodity prices has put downward pressure on inflation. According to the official data, the consumer price index for Japan in December 2008 was 101.3 (base year 2005=100), down 0.4% from the previous month, and up 0.4% year-on-year. A fall in prices will add on to the slowdown of economy. A period of deflation generally results in lower savings and investments. It may also lead to deflationary spiral in which fall in prices lead to lower production activities and hence lower wages leading to decreased purchasing power and lower demand. In history this kind of viscious deflationary spiral occured during the Great Depression.

SEBI amends takeover norms for Satyam like companies

Securities and Exchange Board of India (SEBI) has made a significant amendment in the takeover norms. The amendment was declared on February 13, 2009 on SEBI's webiste.

The amendment was triggered by the sale of scam-hit Satyam Computer Services Ltd. After the fraud was disclosed by Satyam's founder in January 2009, the stock had fallen more than 90%. However, with the interest of getting a buyer the stock has gone up but is still down by more than 70% when compared to pre-crisis period. The current situation of Satyam demands an urgent restoration of customer's faith which can be brought if a well established player buys Satyam. Many corporates have shown interest in buying Satyam's business as it is currently available at huge discount to its peers. However, the uncertainty over the law-suits which Satyam may face is restricting the buyers. L&T, iGate Global Solutions Ltd., & Spice are the front runners in the race to acquire Satyam. L&T has gone ahead and bought 12% stake from public. To gain management control it has to buy more shares. By the current norms any company acquiring more than 15% stake in any publicly listed company has to give an open offer to the public for buying additional 20% shares. There is some regulatory restrictions on the price of open offer. Simply stated, the price has to be more than the six months average trading price, which in the case of Satyam will be about Rs 250 per share whereas its current market price is about Rs 50 per share. This would be a significant premium to its current market price as the value of Satyam has eroded significantly post the fraud-disclosure. No buyer would be keen on paying such a higher price as indicated by the SEBI's open offer regulations.

To meet this challenge SEBI had two options: make Satyam an exceptional case or amend the regulation to suit such cases. SEBI has gone forward and relaxed the regulations for Satyam like cases. SEBI has added the following sub-regulations:

"
(i). No public announcement for a competitive bid shall be made after an acquirer has already made the public announcement pursuant to relaxation granted by the Board in terms of regulation 29A.
(ii) Relaxation from the strict compliance of provisions of Chapter III in certain cases.
The Board may, on an application made by a target company, relax any or more of the provisions of this Chapter, subject to such conditions as it may deem fit, if it is satisfied that –
(a) the Central Government or State Government or any other regulatory authority has removed the board of directors of the target company and has appointed other persons to hold office as directors thereof under any law for the time being in force for orderly conduct of the affairs of the target company;
(b) such directors have devised a plan which provides for transparent, open, and competitive process for continued operation of the target company in the interests of all stakeholders in the target company and such plan does not further the interests of any particular acquirer;
(c) the conditions and requirements of the competitive process are reasonable and fair;
(d) the process provides for details including the time when the public offer would be made, completed and the manner in which the change in control would be effected;
(e) the provisions of this Chapter are likely to act as impediment to implementation of the plan of the target company and relaxation from one or more of such provisions is in public interest, the interest of investors and the securities market.
”

Source: SEBI Act.

Though this will make the way clear for Satyam bidders, this amendment is highly unlikely to be applicable for other cases as the conditions required are very narrow and unlikely to be met by even a similar company in future.