Wells Fargo, Banco Santander, other big banks lost $635bn in market cap to the pandemic

Wells Fargo, Banco Santander, and other major global banks cumulatively lost $635.33 billion in market capitalisation between December 2019 and August 2020 to the pandemic. Data from BuyShares reveals.

America’s Wells Fargo was the most important loser with a percentage change within the market capitalisation at -56.26% followed by Spain’s Banco Santander at -46.16%. During the amount, Japan-based Mizuho Financial Group had the smallest amount of change at -11.33%.

The data shows that the highlighted banks registered one among the most important slumps in market capitalisation around February within the wake of the coronavirus pandemic. JP Morgan still holds a superior market capitalisation at $437.2 billion in December 2019 and $305.44 billion as of August 2020.

The coronavirus pandemic has brought tons of strain to the banking and full financial market sector causing unprecedented loss. the complete picture of the losses is well exhibited when comparing the market capitalisation within the course of the pandemic.

Source: BuyShares

Mitigation plans to save lots of the banking sector

Banks went into the pandemic stronger and it’d take time before they return to normal profitability. The pandemic led to a slump in various sectors of the economy and it had been evident under the stock markets. The crisis generated massive instability and high volatility in global capital markets. The financial sector was among the foremost impacted resulting in the drop by market capitalisation.

The coronavirus was first reported in December 2019 but the banking and financial sector didn’t react immediately. At that time, there was little information on how long it’d last and whether China would contain it and stop it from spreading to other countries.

Source: BuyShares

The drop by valuations for the chosen banks could are much worse if there was no intervention from central banks. The immediate measures taken by regulators to ease restrictions on liquidity and capital, banks have proved beneficial. Although the measures put in situ by authorities helped banks, they still face some immediate pressures on their capital and liquidity position, because the length and severity of the outbreak remain uncertain.

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At an equivalent time, banks also requested regulators to ease capital requirements. for instance, the US Securities and Exchange Commission (SEC), proactively granted relief for regulatory financial reporting to companies suffering from the health crisis.

Customers began seeking financial relief, and regulators encouraged them to assist them. To salvage things, most banks began initiating several measures like testing and implementing business contingency plans, which include alternative workplace arrangements like split work sites, performing from home, and rotating shifts for all employees. Most banks turned to virtual operations in serving customers as people stayed reception to curb the spread of the virus.

Notably, the supply of technological innovation played a key role in guaranteeing the business continuity of the banks. Some firms also resorted to the activation and enhancement of robotics solutions or AI. Notably, the shift proved costly for a few institutions that weren’t prepared for such a crisis.

The future of banking post-coronavirus

The pandemic has also accelerated the shift towards digital banking especially with concerns over handling physical money. for instance, within the US, the Federal Financial Institutions Examination Council ordered banks to check their online systems’ capacity to handle an influx of digital banking customers.

After the pandemic, most banks should leverage on digital banking to stay their business afloat. Traditional banks that take lessons from digital financial institutions will find themselves more prepared to compete with challenger banks even after the coronavirus pandemic. Before the pandemic, challenger banks were already on the increase, posing an excellent competition for traditional banks.

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Early indicators show that the majority of banks will struggle to get profits thanks to a sustained period of low interest rates within the course of the health crisis. Despite the gloom future with regard to profitability, banks got to start plotting their post-COVID-19 future.

Banks will get to adapt to a replacement customer norm with new business models also as rethink what drives brand loyalty. Restructure the addressable market to grow beyond the core. most significantly banks will get to validate long-standing business assumptions. Long-held assumptions that have underpinned the banking business model may vary.

 

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