Beruflich Dokumente
Kultur Dokumente
On
Investment banking
Submitted to:
Submitted by:
Manpreet Kaur
CONTENTS
Meaning of investment banking
History of investment banking
Need of investment banking
Functions of investment banking
Structure of investment banking
Scope of investment banking in India
List of investment banks
Regulatory framework of investment bank of India
Types Of Players in Investment Banking
Investment banking in India
Advantages and disadvantages of investment banking
Swot analysis of investment banking in India
Conclusion
Bibliography
JP Morgan and
Research-
Such entities raise capital and invest much like banks but escaped
regulation which enabled them to over-leverage and exacerbated systemwide contagion. The jury is still out on Dodd-Frank's efficacy, and the Act
has been heavily criticized by both those who argue for more regulation
and those who believe it will stifle growth.
Investment Banks like Goldman Converted to BHCS
"Pure" investment banks like Goldman Sachs and Morgan Stanley
traditionally benefited from less government regulation and no capital
requirement than their full service peers like UBS, Credit Suisse, and
Cities.
During the financial crisis, however, the pure investment banks had
to transform themselves to bank holding companies (BHC) to get
government bailout money. The flip-side is that the BHC status now
subjects them to the additional oversight.
Industry Prospects after the Crisis
Morgan Stanley, Credit Suisse, BofA /Merrill Lynch, and Citigroup, are
generally recognized leaders in M&A advisory and are usually ranked
high in M&A deal volume .
The scope of the M&A advisory services offered by investment
banks usually relates to various aspects of the acquisition and sale of
companies and assets such as business valuation, negotiation, pricing and
structuring of transactions, as well as procedure and implementation. One
of the most common analyses performed is the accretion/dilution
have
changed
Gillette the price and quantity of the new shares issued, so JP Morgan
better be confident that they can sell these shares.
The sales and trading function at an investment bank exists in part
for that very purpose. This is an integral component of the underwriting
process in order to be an effective underwriter, an investment bank must
be able to efficiently distribute the securities. To this end, the investment
banks institutional sales force is in place to build relationships with
buyers in order to convince them to buy these securities (Sales) and to
efficiently execute the trades (Trading).
Sales
A firms sales force is responsible for conveying information about
particular securities to institutional investors. So, for example, when a
stock is moving unexpectedly, or when a company makes an earnings
announcement, the investment banks sales force communicates these
developments to the portfolio managers (PM) covering that particular
stock on the buy-side (the institutional investor). The sales force also
credit, and open checking and savings accounts, while investment banks
can underwrite securities, advise on M&A, and provide institutional
brokerage services.
Under the Glass-Stegall Act, commercial banks and investment banks had
to limit their respective activities to that which traditionally fell under
those respective labels.
Late 1999 saw the repeal of the Depression-era Glass-Steagall Act,
marking the deregulation of the financial services industry. This now
allowed commercial banks, investment banks, insurers, and securities
brokerages to offer one another's services.
As such, many investment banks now offer retail brokerage (retail
meaning the customers are individual investors rather than institutional
investors) as well as commercial lending. For example, today you can
open a checking account with JP Morgan via its Chase brand, while JP
Morgan offers investment banking services and asset management. Until
1999, one financial institution providing all of these services under one
roof was technically not allowed (although many post-enactment
loopholes basically neutered the law long before 1999).
It is not an understatement to say that deregulation has transformed
the financial services industry, with the repeal paving the way for megamergers and consolidation in the financial services industry.
In fact, many blame the repeal of the Glass-Steagall as a
contributing factor to the financial crisis in 2008-9.
BACK OFFICE
Operations and technology
Investment banks are split up into front office, middle office, and
back office. Each sector is very different yet plays an important role in
making sure that the bank makes money, manages risk, and runs
smoothly.
I.
Front Office
Think you want to be an investment banker? Chances are the role
you are imagining is a front office role. The front office generates the
banks revenue and consists of three primary divisions: investment
banking, sales & trading, and research.
Investment banking is where the bank helps clients raise money in
capital markets and also where the bank advises companies on
mergers & acquisitions. Corporate finance is the traditional aspect
of investment banks which also involves helping customers raise
funds in capital markets and giving advice on mergers and
acquisitions (M&A). This may involve subscribing investors to a
security issuance, coordinating with bidders, or negotiating with a
merger target. Another term for the investment banking division is
corporate finance, and its advisory group is often termed "mergers
and acquisitions". A pitch book of financial information is
generated to market the bank to a potential M&A client; if the
pitch is successful, the bank arranges the deal for the client. The
investment banking division (IBD) is generally divided into
industry coverage and product coverage groups. Industry coverage
groups focus on a specific industry such as healthcare, public
finance
(governments),
FIG
(financial
institutions
group),
Middle Office
Typically
includes
risk
management,
financial
control,
interaction between the front office and middle office to ensure that the
company is not taking on too much risk in underwriting certain securities.
Risk management: Risk management involves analyzing the
market and credit risk that an investment bank or its clients take onto
their balance sheet during transactions or trades.
Corporate treasury is responsible for an investment bank's funding,
capital structure management, and liquidity risk monitoring.
Financial control tracks and analyzes the capital flows of the firm,
the finance division is the principal adviser to senior management on
essential areas such as controlling the firm's global risk exposure and the
profitability and structure of the firm's various businesses via dedicated
trading desk product control teams. In the United States and United
Kingdom, a comptroller (or financial controller) is a senior position, often
reporting to the chief financial officer.
Internal corporate strategy tackling firm management and profit
strategy, unlike corporate strategy groups that advise clients, is nonrevenue regenerating yet a key functional role within investment banks.
III.
Back office:
Typically includes operations and technology. The back office
provides the support so that the front office can do the jobs needed to
make money for the investment bank. Operations: This involves datachecking trades that have been conducted, ensuring that they are not
wrong, and transacting the required transfers. Many banks have
outsourced operations. It is, however, a critical part of the bank.
Technology: Every major investment bank has considerable
amounts of in-house software, created by the technology team, who are
also responsible for technical support. Technology has changed
considerably in the last few years as more sales and trading desks are
using electronic trading. Some trades are initiated by complex algorithms
for hedging purposes.
be controlled and its sale to the public regulated; the best advantage is
that there is no limitations to the income.
An investment bank is a financial entity that assists individuals and
companies in raising capital through making investments and
engaging in the stock exchange. They enable business professionals
and entities to find the most profitable investments, as well as
maintaining them in the long term
Disadvantages of Investment Banking
Diversification towards Capitals Markets: More than any other
industry, it is the investment banking industry that has a direct bearing
on the way capital markets function. Any changes in the capital
market regulations affect the brokerage side of the business, along
with the trade clearing and settlement houses. The trading personnel
should be conversant with the regulations, guidelines, procedural
formalities and actual trade execution processes involved in capital
market.
No Proper System of Investment Banking
Lack of Institutional Financing
markets
for
the
infrastructure
sector
including
Development
Bank
of
India:
The
Industrial
Tata Investment Corporation Limited (TICL): TICL is a nonbanking financial company (NBFC) registered with the Reserve
Bank of India under the Investment Company category. The
companys activities comprise primarily of investing in long-term
investments in equity shares and other securities of companies in a
wide range of industries. The major sources of income for the
company consist of dividend income and profit on sale of
investment.
providing all kinds of Investment related activities which include
investment banking and corporate advisory services.
Yes Bank: Yes Banks Investment Banking group is involved in the
identification, structuring and execution of transactions for our
clients in diverse industries and geographies. Some of the typical
transactions include mergers & acquisitions, divestitures, private
equity syndication and IPO advisory.
CONCLUSION
Investment banking provides a platform for investors to build and
maintain their investments as they have teams of experienced
professionals who offer knowledgeable insights into the stock exchange.
Additionally, they have the expertise in terms of investing in the most
profitable areas in different industries. Therefore, individuals and
companies are advised to seek the services of an investment bank as they
can benefit from up-to-date and expert insights in investing money and
raising capital.
BIBLIOGRAPHY
www.Investopedia.com
www.scribd.com
www.google.com
www.enotes.com
www.wikipedia.com