The financial services industry is a key sector for investment globally and contributes significantly to the foreign direct investment (FDI) landscape. Investment Monitor reveals the hotspots where the top financial services multinational companies (MNCs) establish subsidiaries.

Almost one-third of the financial services companies are US-based

Our expanded Multinational Companies Database contains subsidiary information on 6,186 of the world’s leading companies. To assess the trends within the financial services sector, 890 companies were examined.

In total, financial service companies represent 14.4% of the multinationals included in the database.

Of the 890 financial service companies analysed, the US was by far the leading headquarter location. US-based companies accounted for 30.6% of the world’s top financial services corporations, followed by China (10.7%) and the UK (6.9%).

The financial services sector is one of the US’s strongest sectors. According to the US Bureau of Labor Statistics, it employs almost nine million people. Wages in the financial services industry were 28% higher than all sectors combined as of May 2022, while the financial services industry accounts for 8.3% of US GDP, according to the Bureau of Economic Analysis. Sub-nationally, Z/Yen lists New York as the leading global financial centre in its Global Financial Centres Index. Boston, San Francisco, Los Angeles and Chicago are also listed in the top 20.

Most leading financial services companies have ten or fewer subsidiaries

Overall, the 890 financial services corporations analysed operate 45,977 global subsidiaries. This comes to an average of 52 subsidiaries per company, although it should be noted that this is not evenly distributed. The average figure is heavily skewed by a few large companies. In fact, most financial services companies have fewer than ten subsidiaries.

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The US is the leading destination for financial services subsidiaries

The US is the location of choice for one-third of the 45,977 subsidiaries recorded in our database. This is almost three times as many as the UK – the second most popular destination for financial services companies.

The UK, and more specifically London, is still viewed as a key financial services hub globally. Even though Brexit led to companies moving operations to elsewhere in Europe, London is still the leading inbound location for financial services FDI. In fact, London accounts for three-quarters of all financial services FDI into the UK, according to GlobalData’s FDI Projects Database.

Low-tax jurisdictions the Cayman Islands, Luxembourg and Hong Kong rank third, seventh and ninth, respectively, when it comes to favoured locations for financial services FDI. The Cayman Islands demands no corporate or direct taxes from residents. Although Luxembourg has a top corporate tax rate of 24.94%, many companies pay less than 1%. Hong Kong’s low tax rates and access to the Greater China market make it a desirable location for financial services investors.

Slightly more domestic than foreign subsidiaries

Overall, the top financial services companies created 25,070 domestic subsidiaries (54.5%) and 20,907 foreign subsidiaries (45.5%). This suggests leading financial services companies slightly favour their domestic market, but are keen to have a foot in both local and international markets.

Delving deeper within countries, the subsidiary split is more nuanced. Within the top ten countries by number of subsidiaries (domestic and foreign), only financial services companies headquartered in the US, China and Australia have significantly more domestic than foreign subsidiaries. China has the highest proportion of domestic subsidiaries, with 73%. In both Australia and the US just under two-thirds of leading financial services companies’ subsidiaries are created locally. The large domestic markets are likely key reasons for the high domestic proportions in both China and the US. Australia’s developed financial market and geographic positioning and language are perhaps reasons for its domestic subsidiaries outweighing foreign subsidiaries. New Zealand, the US and the UK were key source countries for companies creating foreign subsidiaries in Australia.

In contrast, Italy (83% foreign subsidiaries) and Switzerland (85%) have significantly more foreign than domestic subsidiaries. This highlights the importance of FDI to these countries.

Who are the big investors?

The ten largest financial service companies by number of subsidiaries have 8,640 subsidiaries between them.

UnitedHealth Group, a US-based healthcare and insurance company, ranks as the top financial services company by number of subsidiaries. The company has 1,445 subsidiaries globally, 86% of which are domestic.

The top six companies are all US-based. Marsh McLennan, which ranks as the fifth-largest financial services company globally, has notably more foreign subsidiaries than domestic. The professional services company has 703 foreign subsidiaries, compared with 103 domestic ones.

The four non-US-based top ten companies are based in Europe. Commerzbank and Munich Re each have more than 600 subsidiaries and are headquartered in Germany, while UK-based Aviva and Irish-incorporated Aon have 680 and 649 subsidiaries, respectively.

The data shows that financial services companies continue to create new subsidiaries and maintain existing presences, both locally and internationally. The continued rise of fintech may change this approach in the future, with companies opening more fintech operations in lieu of creating subsidiaries. Our FDI data shows that fintech FDI is expected to rise by 25% in 2021, highlighting its upward trajectory.