Are International Banks Different? Evidence on Bank Performance and Strategy

56 Pages Posted: 12 Aug 2019

See all articles by Ata Can Bertay

Ata Can Bertay

World Bank - Development Research Group (DECRG); Tilburg University - European Banking Center

Asli Demirgüç-Kunt

World Bank - Development Research Group; World Bank

Harry Huizinga

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: June 24, 2019

Abstract

This paper provides evidence on how bank performance and strategies vary with the degree of bank internationalization, using data for 113 countries over 2000-15. Over this period, bank internationalization is associated with lower valuations and lower returns on equity. However, developing country banks that internationalized seem to have fared better than their high-income counterparts. Following the crisis, international banks were revalued particularly if they had stable funding in the form of deposits and if they had more generous deposit insurance coverage. Furthermore, for international banks headquartered in developing countries, our results indicate that bank internationalization reduces the cyclicality of their domestic credit growth with respect to home country gross domestic product growth, smoothing local downturns. In contrast, if the international bank is from a high-income country investing in a developing country, its lending is relatively procyclical, which can be destabilizing.

Keywords: F36, G21, G28

JEL Classification: bank internationalization, financial crisis, deposit funding, procyclicality

Suggested Citation

Bertay, Ata Can and Demirgüç-Kunt, Asli and Huizinga, Harry, Are International Banks Different? Evidence on Bank Performance and Strategy (June 24, 2019). BIS Working Paper No. 790. Available at SSRN: https://ssrn.com/abstract=3420247

Ata Can Bertay (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
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Tilburg University - European Banking Center ( email )

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Asli Demirgüç-Kunt

World Bank - Development Research Group ( email )

United States
202-473-7479 (Phone)
202-522-1155 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/ademirguckunt/

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Harry Huizinga

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2623 (Phone)
+31 13 466 3042 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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