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Banking Industry’s Deserved Victory



The resurgence of COVID-19 cases worldwide and inflation, amongst other things, have triggered a bittersweet fluctuation for Wall Street in the new year, joining the worldwide financial market tumble. Market giants S&P 500 and The Dow Jones Industrial fell by 52 points or 1.1% to 4,568 and 433 points or 1.2% to 34,932, respectively, on Tuesday (12/21). Japan’s Nikkei 225 and Germany’s DAX also slipped by 1.9% and 2.1% within the same day. This substantial plunge does show a massive contrast with how on Wednesday (12/15), both S&P 500 and The Dow Jones Industrial indexes managed to close by 4,710 and 35,927 sequentially. The string of losses was also triggered by a severe rebuke in the White House after Senator Joe Manchin condemned Democrats’ US$2 trillion spending package. With markets being highly volatile since the discovery of the Omicron variant, worsened by the domino effect brought by said political collision and the vice grip of inflation, experts predict an unstable wave in the market in early 2022. However, on the other hand, the banking industry has grown remarkably in the past year. Even more so than prior to the virus outbreak.

Banks in the US are preparing to dispense huge bonuses after their profitability has soared over the second year of the pandemic. Despite facing international economic instability and historically low-interest rates, banks have been at their highest level in recent history. Morgan Stanley, which averaged about US$13 billion of profit annually, made well over US$14 billion in the third quarter of 2021. Goldman Sachs broke its annual gain record, US$46.7 billion revenue through three quarters and JPMorgan is set on approximately US$45 billion, a milestone if compared to 2018, US$25 billion. Along with banks' profit growth, cryptocurrency and startups also skyrocketed more than ever before. In 2021, the crypto industry saw a 2000% account growth while unicorns have grown by 16%, from 728 to 842 companies globally. While these digital empires are creating their legacy, the banking industry is invincible, as it would adopt extensive technological changes, creating a digitalized experience for its customers.

In Indonesia, banks with core capital below Rp6 trillion or mini banks are anticipated to become the new sensation for investors. In the early December of 2021, stocks of said banks have become the sought-after option, following the upward trend from the month prior. As of the market's closing on Monday (12/13), Bank Amar Indonesia (AMAR) shares led the gains, soaring up by 65.33% compared to the previous month's closing price. Bank Bumi Arta (BNBA) shares also increased in the same period with a percentage of 52.32%. This notable growth is prompted by the fact that mini banks are racing against time to attain their minimum capital limit of Rp2 trillion by the end of the year. The acquisition of mini banks by global investors and startups contributes to the growth of mini banks in the country. Apart from the adequate banking margins in the country, digitalization is also a factor that drives high investment interest in these new trends. In essence, the future of the banking industry's movements and updates are still very dynamic, with the current ongoing pandemic and also digitalization brought by the current circumstance. These ever-changing landscapes do bring opportunities and expectations for investors in the upcoming time.


Sources

Bloomberg

CNBC Indonesia

Market Watch

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