2018: banks’ share prices disappoint for year to date

2017 was a positive year for share prices at the world’s largest banks with share price rises at the vast majority of banks. Seven months into 2018 the picture is very different reports Douglas Blakey with share price rises few and far between 2018 is not shaping up to be a memorable year for bank share price performance.

Of the 30 largest banks in the world by market cap, only eight are showing a rise in share price.

And with only one or two notable exceptions, the positive movements are modest.

JPMorgan Chase, the world’s largest bank by market cap, deserves a positive mention.

Yet again Chase’ results beat analyst forecasts with a record second quarter net income of $8.32bn, up 18.5% from the year ago quarter.

Notable highlights included digital metrics at Chase, including active digital banking customer numbers rising by 4.5% to 47.95 million and active mobile banking customers up by 10.4% to 31.65 million.

Chase is also attractive positive PR for the national roll-out of its digital sub-brand Finn.

Offering the now-standard array of features for a digital bank, including fast onboarding and spending categorisation, Finn’s Chase mobile bank savings features are noteworthy.

Finn users are presented with a wide range of automated savings options, such as rounding up transactions and saving the difference, and saving set amounts when spending at specified retailers or when transactions exceed a pre-determined value.

For the year to end July, Chase share price is ahead by more than 5%.

Largest 30 banks by market capitalisation

Other winners

It is a short list. Bank of America reported Q2 net income up 33% to $6.8bn and its first half net income of $13.7bn is a record.

In the first half of the year Bank of America’s market cap overtook ICBC to become the second largest bank by market cap. For the year to date, Bank of America’s share price is up by 2.6%.

As with Chase, Bank of America is powering ahead in digital with impressive numbers. 

Bank of America’s mobile banking users increased by 11% year-on-year to 25.3 million. 

Digital sales grew to 24% of all Consumer Banking sales and customers logged into the bank’s app 1.4 billion times. Over 35 million P2P payments were made via the bank’s Zelle service, more than double the year-ago quarter with Zelle users doubling to 4 million during the past year.

European performance muted, Australia in the red

As RBI went to press, the UK’s largest retail bank Lloyds posted a resilient set of results.

Despite another £550 of PPI provisions in the first half and the ongoing uncertainty of Brexit, Lloyds results were generally positive.

Lloyds H1 statutory profit rose by 38% to £2.3bn, boosted by flat operating costs and improved margins.

Of particular note Lloyds’ cost-income ratio improved by 4.2 percentage points from the year ago period to 47.7% while digital metrics also impressed.

Digital customers rose to 13.8 million from 13.4 million a year ago with mobile banking users up to 9.8 million from 9.3 million a year ago.

Despite a number of positives, Lloyds share price is down by 5.9% for the year to date.

The travails of Australia’s major lenders, culminating in the Royal Commission into misconduct are reflected in the current largest 30 banks by market cap ranking.

Westpac’s share price is down by 6.5% for the year to date while CBA and NAB are no longer ranked in the top 30; by contrast ANZ is bucking the trend with a modest 1.6% rise for the year to end July.

From this perspective, yes – deploying and maintaining ATMs must be done in a strategic manner. This being said, with the rapidly changing consumer expectations, businesses and banks must keep in mind that placing a strain on communities that already struggle to access cash might backfire.