DOMESTIC BANKS OR INTERNATIONAL BANKS- MORE PROFITABLE:

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Before starting the tug of war about which one is more profitable- domestic or foreign banks, lust us enlighten ourselves with what exactly domestic and international banks are and their ways of working.

Domestic banks are home banks which are opened and operated with the geographical boundaries of the country. On the contrary, international banks transverse geographical boundaries. Transactions of several countries are done by international banks. They deal with multiple currencies, whereas, domestic banks use single currency. Domestic banks have their registered office in one country, but foreign banks, though have their headquarters in a particular country, they operate worldwide. Domestic bank has to comply the local laws of the country it is registered in. For a foreign bank, it has to adhere to both the local laws of the country it has the headquarter in and also the laws of the country that it is operating in. Domestic banks do not worry about the fluctuations in foreign currency, but it is a huge concern for international banks. When it comes for multinational companies, they reply on foreign banks for continuing the usual financial operations for growth and economic developments. The companies use foreign financial institutions to invest large amount of funds, aiming to expand their business globally. These companies have the tie ups with various other MNCs and hence, use international banks. 

A bank’s profitability and liquidity count on the amount of assets it holds. In 2019, the international banks seemed to make good profits worldwide, leaving behind the regional banks. Chinese banks dominated the list by holding top four rankings. The American banks followed the list by securing fifth to eighth positions in the list. British banks overcame the crisis due to Brexit and raised their profits by one third. In Asia, Vietnamese banks had growth by a third, but due to reorganization of the banking sector, Indian banks’ profit fell by 44%. Japanese banks, too, had a poor profit and it was down by 30%. The global profit of the international banks in 2019 was $1135 billion. Also, the fact that some of these banks provide managed account trading service, which is a diversified assets / portfolio handled by regulated money managers. A forex managed account is much for prime investors who want banking service as well as investment to keep the money rolling.

Foreign banks are more profitable than domestic banks when they operate in a host country whose banking sector is less competitive and when the parent bank in the home country is highly profitable. As the GDP rates of several countries have fallen down, foreign banks’ profit margins increased. Changes in bank administration of a regional bank paves way for the international banks to raise their profit.

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