Indian banks planning expansion while others consolidating biz

The government’s argument that Indian banks are healthier than those in the western world has got fresh backing from an international study, which shows that the banking and financial services players in emerging economies are looking to expand at a time when their counterparts in the United States and Europe and Middle East are consolidating their businesses.

According to the survey of 275 executives of global banks and other financial institutions conducted by The Economist Intelligence Unit (EIU) between October and November 2008, 65% respondents said in the short-term they would focus on domestic market and fewer product lines.

However, 48% in the Asia-Pacific said they plan to enter or expand their footprint in foreign markets.

Banks in North America and the Middle East are particularly conservative, while emerging-market institutions express they plan to expand business, the report on the survey titled ‘Beyond the home market: The future of crossborder banking’ stated.

“Old-school virtues are back for now and the focus will be on core banking and home regions, but emerging Asia will continue to offer growth opportunities,” Economist Intelligence Unit senior editor Manoj Vohra said.

The survey pointed out that Asia is seen the best opportunity to grow business as it has a vast population, which is outside the banking net. Forty-nine percent respondents cited this as a key reason for expanding in the region. However, nearly two-third of the total executives said that political and regulatory hindrances limit their expansion plans.

Among the other findings, the survey pointed out that majority of the respondents is putting a higher premium on risk management to limit the impact of financial crisis.

This area was quoted as the major concern by 57% executives. “Security and fraud detection are also viewed as important issues,” the report stated.

On the use of information technology, it said that building IT platforms is difficult for banks with operations in foreign markets. “Indeed, just 10% of banks say they have experienced no problems when implementing an IT strategy in foreign markets. The most common problem surrounds the interoperability and integration of platforms and applications-mentioned by 42% of respondents,” the survey found.

The survey, which chose was 20% respondents from North America, 16% from Western Europe, 24% from Asia-Pacific, 24% from the Middle East, and the rest from other regions. Thirty-three percent of them were chief executive officers, chief financial officers and chief investment officers, while the rest consisted of senior vice-presidents, heads of business units and other senior managers.

Of the total 275 survey respondents, 35% work with banks and financial institutions with assets over $50 billion, 39% with assets between $1 billion-50 billion, and the balance under $1 billion.