Question

Globalisation is at work in the banking industry, where globalisation refers to an increase in competition by foreign competitors and home institutions’ doing business in the global market. To face up to the challenges of the internationalisation process banks of all sizes and from different countries should deal with long‐term issues and industry analysis as well as firm-specific strategies. Banks are no longer in the business of buying (i.e. saving) and selling (i.e. lending) money but that of offering complete financial services to the banking public. Australia’s major banks include CMA, ANZ, NAB and Westpack.

Australian banks have increased their business in the global market. Explain how does this global business activities affect their profitability. (worth 6 marks and 350-400 words required)

Answer 1

Global businesses helps foreign direct investment as stake sale opportunities as well as pouring of foreign institutional investment into shares of these banks

Globalisation helps them trade in different currency, different regions, different asset classes and thus diversification happens which minimises risks and helps in higher net interest margin and higher lending globally to high networth investors.

This leads to improvement in revenue and thus net income or bottomline or profitability accruses and grows in ohassed manner as banks diversify into newer products and services like Mutual fund houses, brokerage and consulting, investment banking, risk management, etc.

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