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Global banks' m-cap crashes

By Swapnil Mayekar in Mumbai
September 16, 2008 10:50 IST
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Global banking giants that have been affected by the US sub-prime crisis have seen their market value erode by an average 57 per cent from the peak, while the top three Indian banks fared marginally better with a 50 per cent decline from their all-time high share prices on January 14 this year.

The market value of the top 10 foreign banking firms fell from $1090 billion to $476 billion from their peaks in September-October last year. In comparison, the market capitalisation of the three Indian banks dropped from $ 99 billion to $ 49.37 billion.

Lehman Brother's Holdings, which have filed for bankruptcy, led the pack with its market value crashing by almost 94 per cent from its high of $40 billion on November 14, 2007 to $ 2.50 billion on Friday.

The market wealth of Deutsche Bank dropped by 78 per cent to $ 17.97 billion, followed by Merrill Lynch & Co ($ 26.11 billion), USB ($ 58.93 billion), Citigroup ($ 97.80 billion), Royal Bank of Scotland ($ 62.06 billion) and Barclays PLC ($ 51.10 billion).

Almost all foreign bank stock hit a 52 week low on July 16, 2008.

In comparison, India's largest private sector lender, ICICI Bank's market value was down by 61.92 per cent from its high in January 2008.

While State Bank of India's market cap fell by 45.3 per cent that of HDFC Bank was down 32.66 per cent.

Financial sector analysts said that financial institutions are much more vulnerable to sudden withdrawals of liquidity or loss of confidence.

This has become obvious with banks such as Northern Rock, Bear Stearns and Lehman Brothers suddenly being forced to pay back debts 30 or 40 times larger than their shareholders' funds and being unable to do so.

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Swapnil Mayekar in Mumbai
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