Internationalization strategies of emerging market banks: Challenges and opportunities

Abstract

The greatly improved economic fundamentals of the major emerging economies over the last decade have propelled several emerging banks into the ranks of the largest. Despite their importance in the global economy, the internationalization of emerging market banks remains an understudied phenomenon. This article examines factors that may internationalization strategies of emerging market banks in the private banking sector, both when going abroad (take-off) and upon arrival in a host country (landing). The private banking interest given its importance in many leading nancial centers around the crisis, several recent scandals, and a fast-changing regulatory environment. We highlight the internationalization strategies of two banks from emerging countries, China and Brazil, and their experience in traditional private banking sector. These two cases highlight factors that may successful internationalization such as prior industry experience, existing client base, entry strategy, ownership type, valuable implications for managers from other emerging economies by providing a better understanding of how emerging market banks expand internationally. Growing wealth in emerging marketsGlobal wealth continues to grow and to produce an increasingly large number of high net worth individuals (HNWIs), especially in emerging countries. A dramatic shift in global wealth distribution is currently taking place around the world, mainly in the Asianumber of HNWIs is growing faster than the rate of GDP in most countries. Many of these individuals are entrepreneurs who demand access to the same investments and services offered to their counterparts in developed countries. Some of this new wealth has found its way to the leading private banking centers around the world. Several well-capitalized and wellmanaged emerging banks are gradually entering a select group of major institutions in international private banking to claim their share of this lucrative sector, encouraged by the fact that more and more of the HNWI universe is composed of citizens and residents from emerging economies. This represents challenges and opportunities for both emerging market banks (EM-banks) and traditional banks.Banks must be prepared to handle increasingly sophisticated demands from this new emerging entrepreneurial class (including both personal and corporate clients). All major institutions in private banking aspire to provide a global range of products and services and to capture an increasing number of these valuable clients. An attractive option for large emerging banks is to internationalize and gain the necessary private banking knowledge abroad in order to assimilate useful business knowmanagement business who from any upgrade in a global brand and reputation).

Analysing stimuli and barriers, failure and resilience in companies’ internationalization: a systematic and bibliometric review

“…The Calia and Ferrante (2013) research findings emphasize how company characteristics influence their choice of pattern for internationalization with Marques et al (2017) reflecting on how companies located in emerging markets strive to enter developed markets in conjunction with a strategy for diversification able to minimize the company's exposure to risk (Luiz et al, 2017). Bertrand et al (2019) returned evidence that companies, whenever opting to expand their activities into different markets, opt for less corrupt countries even while Quer et al (2018) conclude that companies incorporating capital stakes held by the Chinese state display a greater probability for opting to enter markets involving high levels of political risk.…”

“…The Calia and Ferrante (2013) research findings emphasize how company characteristics influence their choice of pattern for internationalization with Marques et al (2017) reflecting on how companies located in emerging markets strive to enter developed markets in conjunction with a strategy for diversification able to minimize the company’s exposure to risk (Luiz et al , 2017).…”

Determinants of the sustainable internationalization and risk‐taking factors in public commercial banks

“…The findings of their research conclude that foreign banks are more open to take risk than local oriented banks and the impact of the factors considered are positive to risk-taking of foreign banks. Marques et al (2017) describe the bank's internationalization of emerging economies, their strategies, challenges, and opportunities.…”

“…Marques et al (2017) describe the bank's internationalization of emerging economies, their strategies, challenges, and opportunities. They illustrated that many private banks of emerging economies gain top ranking in world's banking industry as they take case studies of two banks of China and Brazil.…”

“…The most stated reason for banks internationalization is customer following the banks go across the border to facilitate their more important and loyal customers and to retain them (Berger et al, 2017; Brealey & Kaplanis, 1996; Goldberg & Saunders, 1981; Kindleberger, 1983; Marques et al, 2017). “client following,” in line with Erramilli and Rao (1990).…”