The competitive future of internationalization strategies

Alfred Slager

Chapter 8 in The Internationalization of Banks, 2006, pp 188-202 from Palgrave Macmillan

Abstract: Abstract So where is internationalization heading? Is it a second-best strategy for bank management until their home markets are deregulated; or is it a strategy with its own merits? International growth drags down performance; performance is the main driver for shareholder return. Banks that strongly increased their internationalization activities posted low shareholder returns while banks who did the opposite posted high shareholder returns. It seems no coincidence that in 2001–04 the profitability difference of foreign relative to domestic activities picked up when international M&A showed low volumes. It is not likely that all banks that substantially expanded their foreign bank activities (Accelerating) in the 1980s and 1990s, will maintain their high degree of internationalization in the near future. Future domestic deregulation and absence of stable sources of foreign income will probably prompt a reorientation of foreign bank activities for at least half of the number of Accelerating banks. There seems to be a tacit understanding between banks that the end goal is a merger end game: a highly concentrated international banking market, perhaps resembling the automobile industry or the airlines. Given our findings, this strategy can backfire. More foreign asset accumulation does not automatically equate to a higher market value. National Westminster exhausted its resources in a flawed internationalization strategy, its turnaround strategy.

Keywords: Home Market; Internationalization Strategy; Banking Market; German Bank; Shareholder Return (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-0-230-62504-4_8

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DOI: 10.1057/9780230625044_8

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