Some banks able to defy the gloom

By Jamie Robertson Business presenter, BBC World News

Some banks have weathered the financial storm better than others.

Who would have thought it? In the midst of the worst banking crisis since fat cats were hurling themselves off window ledges in 1929, the best performing stocks on the BBC Global 30 index were - wait for it - three of the world's biggest banks.

Conveniently the index has produced a winner from each region: Bank of America (up 15%), Mitsubishi UFJ (up 11.3%) and HSBC (up 4%).

They are followed by a clutch of classic defensive stocks, Wal-Mart (up 3.8%), Tesco (up 1.6%) and Johnson & Johnson (up 0.7%).

These latter three are all expected to continue do business profitably, come rain or shine - and most expect rain, in large amounts.

Survivors

As for the banks, their rise is due to the fact that investors, despite the general chaos and sense of gloom, have begun to focus on who will emerge from the ruins of this particular crash, not just as survivors but as winners.

Another name in the frame is the Spanish bank Santander, now the proud owner of a stable of British ex-building societies - Abbey, Alliance and Leicester and, in the last month, Bradford & Bingley.

Biggest winners on the Global 30 Bank of America - 15.0% Mitsubishi UFJ Financial - 11.3% HSBC - 4.1% Wal-Mart Stores - 3.8% Tesco- 1.6%

Santander is not yet a member of the Global 30, but with a market cap now a smidgen below that of Bank of America, it could well make the grade by next summer's reshuffle.

Stephen Pope, chief global market strategist at Cantor Fitzgerald Europe, puts it like this:

"I do believe that we are now in a place and at a time where extraordinary value is available.

"Warren Buffett didn't buy into Goldman Sachs just because it was popular. He did so because it made sense."

Bank of America, having swallowed up the investment bank Merrill Lynch and the mortgage lender countrywide, has turned itself in six months into a banking leviathan, with a world class consumer and investment banking outfit.

Granted it's chock-full of toxic debt, but the market seems to have faith the bank is big enough to take the pain - especially if it benefits from the Treasury bail-out.

Buying spree

Mitsubishi UFJ is buying a slice of Morgan Stanley.

It's the biggest overseas acquisition by a Japanese financial company, and will make Mitsubishi UFJ the biggest shareholder in Morgan Stanley.

Biggest Losers on the Global 30 Arcelor Mittal - 36.2% BHP Billiton - 29.8% Nokia - 26.3% Mitsubishi Corp - 24.8% CNOOC -24.5%

The Japanese bank also said it would pay $3.5bn (£2bn) in cash to take full control of UnionBanCal, California's second-biggest bank, and raised its stake in Japanese consumer lender Acom to 40% from 16%.

HSBC, which ironically was the first to blow the whistle on the sub-prime mess early last year, got its writedowns on to its balance sheet early.

It also has a huge geographical spread of operations, with a particular bias towards Asia, which appears to be surviving better than most regions.

Howard Wheeldon, senior strategist at BGC Partners, explains:

"It's probably the most global of all the banks, and it's got a reputation as being risk averse. But its strength is in its spread across markets."

Losers

That said, one of the ominous signs in the Global 30 last month is that Asian stocks have performed worst of all, falling 14.2%.

European ones fell 11.8%. US stocks, where the carnage of the credit crunch lies thick across the trading floors, fell a mere 2%.

It mustn't be forgotten that with the exception of a few minor developing nations, the Chinese stock market's fall of 56% this year is the worst performance of any market.

"The Asian markets have fallen rather belatedly because for a long time it was thought they would not be affected by the crisis," says Mr Wheeldon.

"But it's not the case, and there is a contagion effect into developing markets, into Russia, China, and, to a lesser extent, India."

The most obvious losers have been the big mining and commodity companies, which have been ravaged, not so much by the credit crunch, but by expectations that the slowdown will be global, and that the Asian region, so key to their growth, will not escape.

So BHP Billiton (still committed to its massive $114bn bid for Rio Tinto) is down 29.8%.

Mitsubishi Corp, which generates more than half of its profit from commodities dealing, is down 24.8%. CNOOC, China's oil production company is down 24.5%. BP is down 12.3%.

The big Asian exporters like Canon (down 19.3%) and Toyota (down 7.1%) have also been hit as they worry that the US, their biggest market, is teetering on the edge of recession.

Worries

The problems facing Arcelor Mittal (down 36.2%), the worst faller on the index, sum up most of the worries facing the global markets.

Demand is falling in all regions and steel prices are softening across the board. Even in China the government is trying to keep inflation down and reduce investment.

There's no comfort from the fall in iron ore prices as the big buyers are locked into contracts, many of them settled at the peak of the market, so margins are being squeezed horribly.

Meanwhile credit for everyone in the market is tight - or impossible to get from the banks.

There is some safety in sheer size, so companies like Arcelor Mittal have less to fear, but investors have fewer returns to look forward to.