Emerginvest Blog

Banks across the world are dealing with the global financial crisis differently. While many have been the recipients of government bailout packages, it is still an exceptionally trying time for most global financial institutions.

A Wall Street Journal article published Monday entitled: “Persian Gulf’s Rich Investors Infuse Banks with Capital,” discusses how “a new type of white knight has emerged from the oil-rich Persian Gulf: the super-rich individual investor.”

This article comes the next business day after a royal family member, Sheikh Mansour bin Zayed Al Nahyan led an $11.6 billion investment into Barclays PLC. The article states that “The emergence of other super-rich private investors could offer a fresh lifeline for Western firms, just when Gulf government money seemed strained by problems at home.”

It goes on to reference a number of other such massive investment recipients, such as Citigroup, HSBC Holdings, and Credit Suisse Group.

This contrasts heavily to a recent move by two major Brazilian banks – Banco Itau and Unibanco - who announced they are merging pending central bank and government approval.

According to a Marketwatch article: “Brazil’s Banco Itau and Unibanco will merge,” “Itaú and Unibanco said in a joint statement that the deal will establish ‘the largest private financial conglomerate in the southern hemisphere, with a market capitalization among the top 20 in the world.’”

Not only does the consolidation provide a larger, more stable institution at a time when both banks have been hard hit by the global credit crisis, but it signals a new “heavyweight” in emerging market investments. The news of the merger jumped the BOVESPA by 2.67% according to Emerginvest’s Brazil Market page. The article cites Jack Dzierwa, a “global strategist at U.S. Global Investors” who says that “’This is the bank that people need to own,’ he said. ‘Not only because of its size, but because it’s a good bank. It’s a major, major heavyweight in the emerging-markets index.’” The article futher states that: “The combined bank will be the biggest non-Chinese bank in the MSCI Emerging Markets index.”

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Filed under: Commentary on World Financial News, Emerging Markets, Jonathan (Marketing), World Analysis