Banking Industry

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25.04.2012 Global Business Environment

Xuyang Liu Jie Liu Danladi Maidugu Veronika Sobotova

Overview of international banking Comparative study HSBCJulius Baer

Conclusion

Ancient card

4000 yrs ago

15 century = physical presence outside the HC

(Casu, et al., 2006)

1830s British banks branches Australia, Caribbean, North America colonies COLONIAL BANKING

First of the 20th century = limited expansion After 1960 started US expansion growth MNC

1970S Domination of US banks 1980S Japanese banks 1990S European banks

MODERN INT BANKING

WHO IS THE LEADER?

THE BEGINING OF MODERN BANKING Bretton Woods 1944 IMF Int. Bank for Reconstruction & Development

(Casu, et al., 2006)

2000 1800 1600 1400

12001000 800

Japanese banks

European banksAmerican banks

600400 200 0 1960 1970 1980 1985

Regula tion

1980

Financial services = the most tightly regulated of all economic activities

deregulatory process = necessary to facilitate further internationalisation

The accelerating DEREGULATION of FS is the most important current development in the GLOBALISATION of the Financial Services

The international regulatory environment is highly asymmetrical

(Dicken, 2011)

1981 US = major reforms EU = free flow

1986 UK = Big Bang 1987 France = Little Bang

NAFTA = Mexico open by 2007

DEREGULATIONIndia = strong protectionist / 1993 first reforms

1987 Germany = reciprocity agreement

China = foreign participation

1997 Japan = deregulation

1987 Japan = relaxed restriction

(Dicken, 2011) (Sensarma, 2008)

Technology = most far reaching impact

Absolutely fundamental

Speed of transactions (Internet key driver) Product innovation (new methods, derivatives)

Attracted new entrants

Increased the velocity of turnover

Increased loan activities , respond to fluctuation in exchange rateSupported increased Globalisation of capital flows & Fin. Org.

24 h/day trading

Invisible international trade

Increased productivity

Increased customer influence

(Dicken, 2011) (Jayawardhena & Foley, 2000)

2008 traumatic shock Currently recovering

Rapid growth of emerging markets

Financial world changed - who hold power - how banks will be allowed to operateThe pie will grow and the developed world will have smaller share of the BIGGER pie

absolute decline of the mature nations

(Pennington, 2011)

NORTH

WEST

EAST

SOUTH

Concept Banks in emerging Concept markets are now well capitalised and well funded and big enough to directly compete against west

(Pennington, 2011)

Itau Unibanco

BradescoBanco do Brasil

Sberbank

B

R

VTB Bank

SStandard Bank (ICBC holds there 20% stake)

State Bank of India ICICI Bank

IICBC

HDFC Bank

C

Bank of China China Construction Bank Agricultural Bank of China

HDFC Bank India: there was no financial crisis in India

NedBank South Africa: Banks here did not get hit by the crisis

Baker & McKenzie Hong Kong: Chinese banks were far more insulated than western banks...

(Pennington, 2011)

1Banks in emerging markets = grater potential to grow

2Chinese banks started lending money to European companies

3Some Asian banks are strong and large and still domestic focused = large role in intermediating capital flows at the global level

(Pennington, 2011)

New regulatory regime

Hybrid of: -Regulated free market approach -And so-called state capitalism

REREGULATION?HSBC: Financial markets are increasingly global WHILE the policymakers and regulation remain national...Greater international co-operation required to make the financial system stable

Imposing strict rules on banks to avoid the wests mistakes

(Pennington, 2011)

Chairman of The Bank of China

XIAO GANG

Who from whom?It is not about who should learn from whom. Instead it is about learning from each other, strengthening cooperation and seeking development together.

TRENDS

NegativeN vs. S

PositiveN&S

W vs. E

W&E

(Pennington, 2011)

COMPARE 2000 AND 2011TOP 100 MNCS IN 20008%

TOP 100 MNCS IN 2011

BANKING SECTOROTHERS 85%

15% BANKING SECTOR OTHERS

92%

8 BANKING SECTORS IN 2000 TOP 100 MNCS

15 BANKING SECTORS IN 2011 TOP 100 MNCS

COMPARE 2000 AND 2011TOP 200 MNCS IN 200012% 88%

TOP 200 MNCS IN 201116%

BANKING SECTOR OTHERS

84%

BANKING SECTOR OTHERS

24 BANKING SECTORS IN 2000 TOP 200 MNCS

33 BANKING SECTORS IN 2011 TOP 200 MNCS

DEVELOPING COUNTRIES BANKING SECTOR IN TOP 200 MNCS40 30 developing countries developed countries 2000 2011

2010 0

Compare 2000 and 2011 , there are 5 banking in top 200 MNCS which from developing countries china 3 brazil 2 and china have one banking in top 100 MNCS, also brazil Santander exceed Santander central Hispano

Six Largest US Banks Own 63 Percent of GDP Jordan contribution of GDP

(Euromoney, 1998)

Banking sector bankrupt in the USA

Banking sector in ASIA

Lehman brothers investment bank

Japan only one bank go bankrupt

Merrill lynch investment bank Bear Stearns investment bank

Banking sector in china going well

Origin Hong Kong 1865

HSBC Holdings plc was founded in London in 1992

Second largest banking and financial services group 2011

7,200 offices in 85 countries and 89 million customers$2.418 trillion assets (Half in Europe, quarter in America, quarter in Asia) 2010

Remains largest bank in Hong Kong and largest international bank in China

(HSBC, 2012)

1997 1992Two acquisitions in South America Banco Bamerindus of Brazil and Roberts SA de Inversiones of Argentina

1980s 1865Open to finance the trade between Europe and ChinaAcquired a 51% shareholding in Marine Midland Bank, which it extended to full ownership in 1987

Presence in Europe by acquisition of Midland Bank

Title in here

(HSBC, 2012)

2002 2001Acquire Household Finance Corporation

2000 1999Title in here Purchase ofRepublic National Bank of New York Expansion into Continental Europe with the acquisition of Crdit Commercial de France

HSBC bought Demirbank, an insolvent Turkish bank

(HSBC, 2012)

2004

2004

2003 2003Title in HQ to here MoveLondon HSBC bought Polski Kredyt Bank SA of Poland

Bought 19.9% of the Bank of Communications of Shanghai

HSBC acquired Marks & Spencer Retail Financial Services Holdings Ltd

(HSBC, 2012)

2008

2007

2006 2005Title in Dar es here 70.1%Salaam Investment Bank of Iraq 90 branches in Argentina of Banca Nazionale del Lavoro

HSBC acquired The Chinese Bank in Taiwan

HSBC acquired IL&FS Investment, an Indian retail broking firm

(HSBC, 2012)

(HSBC, 2012)

HM Treasury required all UK banks to increase their capital in October 2007

(HSBC, 2012)

On 9 March 2009 HSBC's share price fell 24.14%, with 12 million shares sold in the last few seconds of trading.

In March 2009, it shut down the branch network of its Finance arm in the U.S.

6,000 job losses and leaving only the credit card business to continue operating

(HSBC, 2012)

Positioning = luxury banking brand Heaven for global private wealth

3rd largest private bank in Swiss

Global growth

Julius BaerShield for tax evaders?

2009 regulatory storm

Large capital base = engine of opportunities, high liquidity level...

(Oh & Lechner, 2010)

New net money inflows

UBS account holders took their money out and brought to JB = profit

Countering crisis with speed (mergers, demergers, management changes)

Quickly adjusted to new realities

Quick turnaround

Private clients believed that JB could handle the crisis better than others.

(Oh & Lechner, 2010)

has made banking more easy, faster, and flexible has brought interest of individuals, corporations, and government through banking has enabled the expansion of banking sector

Casu, B., Girardone, C. & Molyneux, P., 2006. Chapter 4 International banking. In: Introduction to banking. 1st ed. s.l.:Prentice Hall Financial Times, pp. 76-105. Dicken, P., 2007. Making the world Go Round: Financial services. In: Global Shift: Mapping the Changing contours of the world economy. 5th ed. s.l.:SAGE, pp. 379-409. Dicken, P., 2011. "Making the world go round": Advanced Business Services - Especially finance. In: Global Shift, Mapping the Changing Contours of the World Economy. 6th ed. s.l.:SAGE Ltd, pp. 367-398. Economist, 2011. The world's bigest banks. [Online] Available at: http://www.economist.com/node/18898228 [Accessed 2 April 2012]. HSBC, 2012. Our history. [Online] Available at: http://www.hsbc.co.uk/1/2/about-us/history [Accessed 10 April 2012]. Jayawardhena, C. & Foley, P., 2000. Changes in the banking sector the case of Internet banking in the UK. Internet Research: Electronic Networking Applications and Policy, 10(1), pp. 19-31. Oh, L. J. & Lechner, C., 2010. 'Julius Baer Group: Business Model Simplicity in Turbulent Times'. [Online] Available at: http://www.ifb.unisg.ch/en/Lehre/Fallstudien/Julius+Baer+Group.aspx [Accessed 3 April 2012]. Peachey, K., 2012. Barclaycard