Financial Performance of Banking Sectors

This assignment delves into a comparative analysis of various banking sectors across the globe. It examines factors influencing their financial performance, including macroeconomic conditions, regulatory environments, and competitive landscapes. The analysis draws upon empirical literature, industry reports, and case studies to provide insights into the strengths, weaknesses, and future prospects of banking institutions in different regions.

Running head: INTERNATIONAL AND GLOBAL BUSINESS
International and Global Business
Name of the Student
Name of the University
Author Note

1INTERNATIONAL AND GLOBAL BUSINESS
Table of Contents
Introduction......................................................................................................................................2
Banking sector in France.................................................................................................................3
Venturing in France.....................................................................................................................5
Possible Strategies.......................................................................................................................5
Banking sector of Brazil..................................................................................................................6
Venturing in Brazil......................................................................................................................9
Possible Strategies.......................................................................................................................9
Banking sector of Korea..................................................................................................................9
Venturing in Korea....................................................................................................................10
Strategic Recommendations......................................................................................................10
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

2INTERNATIONAL AND GLOBAL BUSINESS
Introduction
The Australian economy has emerged as one of the dominant economies in the global
framework, with impressive growth trends in most of its economic indicators. Much of the
prosperity and stability in the economy of the country can be attributed to the industrial and
commercial growth of the country over the past few years. Over the last few decades, several
industries in the country have flourished extensively, thereby taking the country on the path of
sustained economic growth and contributing to the overall welfare of the residents of the country
(Lim, Chua and Nguyen 2013).
Of the primary industries which flourished impressively, the banking and financial sector
is of utmost importance. The industry alone contributes almost 140 billion AUD annually in the
GDP of the country and hires around 450,000 people. There are many successful players in the
supply side of the banking sector of the country. The business prospects of the country, along
with the increasing investment opportunities in the different markets of the same has led to the
inflow of huge investments as well as entrepreneurs in the country from all parts of the world
(Beatty and Liao 2014). This has in turn contributed considerably in the prosperity and success
of the banking institutions of the country including the bank under consideration.
Keeping this into account, the report tries to analyze the prosperity and potentials of the
concerned banks in the aspect of venturing in other countries except Australia and New Zealand
where it has already made its mark. The report emphasizes on the economies of France, Brazil
and Korea and tries to discuss the possibilities and future prospects of the bank in these foreign
markets. It also tries to take into consideration the threats and challenges which the banks are
expected to face in these economies and the strategies, which can be taken to combat the same.

3INTERNATIONAL AND GLOBAL BUSINESS
Banking sector in France
One of the major players in the global economic banking framework is the banking sector
of France. The industry has not only grown to be globally competitive, but also has emerged to
be one of the leading private sectors in the economy of the country. The industry consists of
more than 380 banks of which five of the banks are counted in the 35 largest banks in the world.
Over the last few years, the banking sector of the country has grown considerably, much of
which can be attributed to the industrial growth in the country, which has been attracting
considerable amount of capital from both domestic investors as well as investors from all parts of
the globe (FBF - Fédération Bancaire Française, 2018). This can be seen from the following
figure:
Figure 1: Investment of private equity firms in the country over the years
(Source: Statista.com, 2018)

4INTERNATIONAL AND GLOBAL BUSINESS
As is evident from the above figure, in spite of considerable fluctuations present in the
aspects of the capital flows in the country over the last few years, the trend has been stability
increasing from 2012. This in turn indicates towards the growth of a robust financial sector,
which is facilitating the effective usage of the inflowing investments that are flowing in the
country.
The growth of the banking sector of the country is not only attributed to the high
investment and capital inflows in the country over the last few decades, owing to its industrial
and commercial prospects, but also considerably on the household income and savings behavior.
Almost 99% of the residents of the country have at least one bank account, which indicated
towards their awareness regarding money saving and investing aspects. According to the
empirical evidences, nearly 27% of the residents of the country visit the bank branches at least
once in a month. The people in the country, in general tend to save more, which reflects in the
household savings rate prevailing in the country (Schoenmaker and Wagner 2013). The rate
being more or less 15.5% (2015) is much higher than many of the developed countries across the
world. This robust savings contributes in the prosperity of the banks in the country, especially
the private ones as they are attracting more and more clients across the countries with productive
savings schemes and investment benefit plans.
Another important factor contributing to the growth of the banking sector is the huge
increase in the demand for asset building among the investors as well as among the households
of the country. Over the last few years, due to increase in the disposable income in the hands of
the households, the investment activities among them has also increased. One of the primary
forms of investment in this aspect is the residential investment, as real estates and housings are
deemed as a long term and profitable form of investments and asset build up for the households

5INTERNATIONAL AND GLOBAL BUSINESS
(Dixon 2012). This has increased the scope of profitability of the banks in the country, which is
also facilitated by a moderately low interest rate. The loan amount for residential investment
amounts to 881 billion euro and is expected to increase even more, with the increase in the
demand for residential investments. Apart from the residential investments, household demands,
life and insurances also contribute to the profitability of the banks in the country. However, there
are six large bank groups which affects the entry of any bank by posing as strong competitors to
them.
Venturing in France
The industrial boom, increasing demand for residential investments, liberal and efficient
legal framework in the country facilitates the banking sector of the country. In the recent periods,
the economic influence and industrial prosperity of France is expected to increase even more
provided Brexit happens. This is because with the exit of Britain from the European Union,
France stands a chance of becoming one of the most influential economies in the EU, thereby
gaining the potential of attracting more businesses and investments in the country (Wood 2016).
All these, clubbed together, make the market in the country a highly lucrative one for the
concerned Australian bank to venture.
Possible Strategies
With the increasing popularity of online banking and varied types of investments, not
only among the corporate investors but also among the households of the country in general, the
bank can design strategies targeted for attracting household savings especially. Implementations
of targeted savings plans for different age groups as well as for different income groups can help
the company to attract more customers, thereby increasing their clientele. The company can also
target the home loan sector to increase their profitability in the economy of France. However, the

6INTERNATIONAL AND GLOBAL BUSINESS
company has to design their strategies keeping in mind the competitions they are expected to
face from the big six banking groups.
Banking sector of Brazil
The banking sector of Brazil, though was primarily dominated by the government of the
country, in the previous years, had undergone immense reforms in the late 1980s, much of which
were targeted towards restructuring and increasing the operations of the private sector, creating
specialized financial institutions for investment handling (Oreiro, Punzo and Araújo 2012). One
of the major objectives of the changes was that of reforming the entry barriers of the foreign
banks in the domestic economy. The entry of these banks have become much easier after
reduction of the entry barriers post 1980, which led to the entry of many international banks in
the market of the country during that period, which can also be attributed to the growth of the
economy at that point of time.
Figure 2: Growth in the number of banks in Brazil over the years

7INTERNATIONAL AND GLOBAL BUSINESS
(Source: Oreiro, Punzo and Araújo 2012)
However, in the recent periods, the Brazilian economy has been facing several major
crisis, which is leading to the overall shrinkage of the previously growing and extremely
potential global economy of the country, which can be seen as follows:
Figure 3: Growth rate of GDP in Brazil over the years
(Source: Economist.com, 2018)
As can be seen from the above figure, the country, in the last few years has been
experiencing negative growth trends in the GDP, which is indicating towards the initiation of a
period of stagnation and shrinking of the economic activities in the country. The direct hit of the
slowdown of the business sectors of the country has been on the financial and banking industry
of the country as the activities of the latter are directly related to the former.

8INTERNATIONAL AND GLOBAL BUSINESS
The recent problems in the banking sector of the country, which have been affecting the
activities and prosperities of the banks operating in Brazil, is the increasing burden of the Non-
Performing Loans in the country. In the last few years, there has been an alarming upsurge in the
amount of non-performing loans in the country, which is expected to increase even more in the
coming years. This can be directly linked to the increase in the credit growth of the banks, which
includes the state as well as the private sector players (Zhang et al. 2013). The loans have been
given in many aspects, including the housing sector as well as for the purpose of household
consumption. However, the recent dip in the economic prosperity and a negative economic
growth rate has made it difficult for the debtors to repay their loans, thereby leading to the
formation of NPLs in the banking sector of the country and increasing the debt burden as can be
seen from the following figure:
Figure 4: Increase in the debt burden as a percentage of total disposable income

9INTERNATIONAL AND GLOBAL BUSINESS
(Source: Vazquez, Tabak and Souto 2012)
Venturing in Brazil
The recent debt crisis growing in the economy of the country, the shrinkage in its overall
economic prosperity and the consistent increase in the non-performing assets of the banks in the
country, makes the contemporary banking sector of the country comparatively less attractive for
any new bank to enter now. In this context, it can be ascertained that if the concerned bank
ventures in this sector it has to face these hurdles and its prosperity will also be hampered due to
the lack of overall tendency of taking loans and repaying the same has been decreasing.
Possible Strategies
The bank can however, keep a track of the dynamics in the economic aspects of the
country as there are high chances of the country to bounce back from the negative growth very
soon. This, if followed by NPL decrease, then the bank can think of venturing in Brazil in future.
Banking sector of Korea
One of the major attribute of the Korean economy in general is the presence of extensive
government control in almost all the aspects of the economy, which also includes the banking
and financial sector of the country. Much of the activities of the banks and the financial sector of
the country are based on the notion of the government, which takes the sector to be mainly a tool
to help the household activities and their monetary decisions, and not as sector with its own
scopes of prosperity. This limits the scope of expansion of the commercial activities of these
banks, thereby keeping them less competitive than their global counterparts (Lee 2012). This is
clubbed with the weak governance structure within the banks themselves, which in turn reduces
the loan rates of the banks over the years:

10INTERNATIONAL AND GLOBAL BUSINESS
Figure 5: Fall in loan rates in Korea over the years
(Source: Businesskorea.co.kr, 2018)
Venturing in Korea
In spite of the presence of government restrictions and lack of competency of the
domestic banks, there are scopes for the concerned bank in venturing in the country, as they can
help in bringing in the new age investment and financial behaviors. This can help them in
encouraging the investors and the households to embark in the processes of asset buildings and
other beneficial financial activities.
Strategic Recommendations
The bank can target the investor and commercial sectors of the country as most of the
domestic banks work primarily for the household sector. This can help them to tap in a
considerable amount of investment and if they can facilitate business activities in the country, it
can contribute positively to their market shares, clientele and long-term sustainability of the
company.

11INTERNATIONAL AND GLOBAL BUSINESS
Conclusion
From the above discussion, it can be concluded that the concerned bank, already having
prospects in Australia and New Zealand, has prospects in France as well as Korea, provided they
take proper strategic measures and target the proper sections of the economy, to tap in as much
investments and capitals as they can. However, the banking sector of Brazil, due to its overall
economic shrinkage, does not look prospective in the recent periods. The concerned bank can
take this into consideration and wait for the appropriate time for venturing in the market of this
country.

12INTERNATIONAL AND GLOBAL BUSINESS
References
Beatty, A. and Liao, S., 2014. Financial accounting in the banking industry: A review of the
empirical literature. Journal of Accounting and Economics, 58(2), pp.339-383.
Businesskorea.co.kr (2018). What Are Hindering Enhancement of Korean Bank’s
Competitiveness?. [online] BusinessKorea. Available at:
http://businesskorea.co.kr/english/news/money/19270-banking-competitiveness-what-are-
hindering-enhancement-korean-bank%E2%80%99s [Accessed 22 Jan. 2018].
Dixon, R., 2012. Banking in Europe (RLE Banking & Finance): The Single Market (Vol. 10).
Routledge.
Economist.com (2018). Brazil's economy Another big decline in GDP. [online] Economist.com.
Available at: https://www.economist.com/news/americas/21662724-ranks-disgruntled-brazilians-
are-groiwing-another-big-decline-gdp [Accessed 22 Jan. 2018].
FBF - Fédération Bancaire Française (2018). Overview of the french banking industry. [online]
FBF - Fédération Bancaire Française. Available at:
http://www.fbf.fr/en/french-banking-sector/overview/overview-of-the-french-banking-industry
[Accessed 22 Jan. 2018].
Lee, S.W., 2012. Profitability determinants of Korean banks. Economics and Finance
Review, 2(9), pp.6-18.
Lim, G.C., Chua, C.L. and Nguyen, V.H., 2013. Review of the Australian economy 2012–13: a
tale of two relativities. Australian Economic Review, 46(1), pp.1-13.

13INTERNATIONAL AND GLOBAL BUSINESS
Oreiro, J.L., Punzo, L.F. and Araújo, E.C., 2012. Macroeconomic constraints to growth of the
Brazilian economy: diagnosis and some policy proposals. Cambridge Journal of
Economics, 36(4), pp.919-939.
Schoenmaker, D. and Wagner, W., 2013. Cross‐Border Banking in Europe and Financial
Stability. International Finance, 16(1), pp.1-22.
Statista.com, T. (2018). Private equity investments France 2007-2016 | Statistic. [online]
Statista. Available at: https://www.statista.com/statistics/428086/total-investment-private-equity-
markets-france/ [Accessed 22 Jan. 2018].
Vazquez, F., Tabak, B.M. and Souto, M., 2012. A macro stress test model of credit risk for the
Brazilian banking sector. Journal of Financial Stability, 8(2), pp.69-83.
Wood, E.M., 2016. Global capital, national states. Historical materialism and globalization.
Zhang, J., Jiang, C., Qu, B. and Wang, P., 2013. Market concentration, risk-taking, and bank
performance: Evidence from emerging economies. International Review of Financial
Analysis, 30, pp.149-157.