Sie sind auf Seite 1von 5

I. What Is Investment Banking?

Commercial banks and investment banks perform primarily different function.


When Mrs. Smith needed loan to buy a car she had to go to commercial banks, but
when ALFA needed to raise cash to fund an acquisition or to build more factories it
had to go to investment banks.

Investment banking is not one specific function or service but rather an umbrella
term for arrange of activities. Investment banks help companies, government
institutions, non-profit institutions, investors and individual about financial
transactions. To issue securities (underwriting), manage portfolios of financial
assets, trade securities (stock and bonds), purchase security and provide financial
advice (merger and acquisitions) and support services. (from Career Central
Magazine)

Investment Banks activities tipically divide as three distincts first is Traditional


Investment Banking, it is consists capital raising and strategic advisory services.
Second is Sales and Trading, it is consists Distribution and execution arm of the
investment bank, Sells and trades stocks and bonds, and Manages the firm’s risk
and makes markets for the securities underwritten by the investment bank. Third
is Research it is consists analysis and recommendations of stocks and bonds, and
Includes company coverage and sector coverage. (form Citigroup)

Organizational structure of an investment banks

Main activities and units

An investment bank is divided into front office, middle office, and back office.
While large full-service investment banks offer all of the lines of businesses, both
sell side and buy side, smaller sell side investment firms such as boutique
investment banks and small broker-dealers will focus on investment banking and
sales/trading/research, respectively.

Investment banks offer security to both corporations issuing securities and


investors buying securities. For corporations, investment bankers offer information
on when and how to place their securities in the market. The corporations do not
have to spend on resources with which it is not equipped. To the investor, the
responsible investment banker offers protection against unsafe securities. The
offering of a few bad issues can cause serious loss to its reputation, and hence loss
of business. Therefore, investment bankers play a very important role in issuing
new security offerings.

Core investment banking activities


• Investment banking is the traditional aspect of the investment banks
which also involves helping customers raise funds in the capital markets
and giving advice on mergers and acquisitions. Investment banking 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 (M&A). 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, industrials, or technology, and maintain
relationships with corporations within the industry to bring in business for a
bank. Product coverage groups focus on financial products, such as mergers
and acquisitions, leveraged finance, equity, and high-grade debt and
generally work and collaborate with industry groups in the more intricate
and specialized needs of a client.

• Sales and trading: On behalf of the bank and its clients, the primary
function of a large investment bank is buying and selling products. In
market making, traders will buy and sell financial products with the goal of
making an incremental amount of money on each trade. Sales is the term
for the investment banks sales force, whose primary job is to call on
institutional and high-net-worth investors to suggest trading ideas (on
caveat emptor basis) and take orders. Sales desks then communicate their
clients' orders to the appropriate trading desks, who can price and execute
trades, or structure new products that fit a specific need. Structuring has
been a relatively recent activity as derivatives have come into play, with
highly technical and numerate employees working on creating complex
structured products which typically offer much greater margins and returns
than underlying cash securities. Strategists advise external as well as
internal clients on the strategies that can be adopted in various markets.
Ranging from derivatives to specific industries, strategists place companies
and industries in a quantitative framework with full consideration of the
macroeconomic scene. This strategy often affects the way the firm will
operate in the market, the direction it would like to take in terms of its
proprietary and flow positions, the suggestions salespersons give to clients,
as well as the way structurers create new products. Banks also undertake
risk through proprietary trading, done by a special set of traders who do not
interface with clients and through "principal risk", risk undertaken by a
trader after he buys or sells a product to a client and does not hedge his
total exposure. Banks seek to maximize profitability for a given amount of
risk on their balance sheet. The necessity for numerical ability in sales and
trading has created jobs for physics,math and engineering Ph.D.s who act as
quantitative analysts.

• Research is the division which reviews companies and writes reports about
their prospects, often with "buy" or "sell" ratings. While the research
division generates no revenue, its resources are used to assist traders in
trading, the sales force in suggesting ideas to customers, and investment
bankers by covering their clients. There is a potential conflict of interest
between the investment bank and its analysis in that published analysis can
affect the profits of the bank. Therefore in recent years the relationship
between investment banking and research has become highly regulated
requiring a Chinese wall between public and private functions.

Middle office

• Risk management involves analyzing the market and credit risk that
traders are taking onto the balance sheet in conducting their daily trades,
and setting limits on the amount of capital that they are able to trade in
order to prevent 'bad' trades having a detrimental effect to a desk overall.
Another key Middle Office role is to ensure that the above mentioned
economic risks are captured accurately (as per agreement of commercial
terms with the counterparty), correctly (as per standardized booking models
in the most appropriate systems) and on time (typically within 30 minutes of
trade execution). In recent years the risk of errors has become known as
"operational risk" and the assurance Middle Offices provide now includes
measures to address this risk. When this assurance is not in place, market
and credit risk analysis can be unreliable and open to deliberate
manipulation.

• 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. In the United States and
United Kingdom, a Financial Controller is a senior position, often reporting to
the Chief Financial Officer.

• Corporate strategy, along with risk, treasury, and controllers, often falls
under the finance division as well.

• Compliance areas are responsible for an investment bank's daily


operations' compliance with government regulations and internal
regulations. Often also considered a back-office division.

Back office

• Operations involves data-checking trades that have been conducted,


ensuring that they are not erroneous, and transacting the required
transfers. While some believe that operations provides the greatest job
security and the bleakest career prospects of any division within an
investment bank, many banks have outsourced operations. It is, however, a
critical part of the bank. Due to increased competition in finance related
careers, college degrees are now mandatory at most Tier 1 investment
banks. A finance degree has proved significant in understanding the depth
of the deals and transactions that occur across all the divisions of the bank.
• Technology refers to the information technology department. 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 purpose

Other businesses that an investment bank may be involved in

• Global transaction banking is the division which provide cash


management, custody services, lending, and securities brokerage services
to institutions. Prime brokerage with hedge funds has been an especially
profitable business, as well as risky, as seen in the "run on the bank" with
Bear Stearns in 2008.

• Investment management is the professional management of various


securities (shares, bonds, etc.) and other assets (e.g. real estate), to meet
specified investment goals for the benefit of the investors. Investors may be
institutions (insurance companies, pension funds, corporations etc.) or
private investors (both directly via investment contracts and more
commonly via collective investment schemes e.g. mutual funds). The
investment management division of an investment bank is generally divided
into separate groups, often known as Private Wealth Management and
Private Client Services.

• Merchant banking is a private equity activity of investment banks.[2]


Current examples include Goldman Sachs Capital Partners and JPMorgan's
One Equity Partners. (Originally, "merchant bank" was the British English
term for an investment bank.)

• Commercial banking is an institution which accepts deposits, makes


business loans, and offers related services. Commercial banks also allow for
a variety of deposit accounts, such as checking, savings, and time deposit.
These institutions are run to make a profit and owned by a group of
individuals, yet some may be members of the Federal Reserve System.
While commercial banks offer services to individuals, they are primarily
concerned with receiving deposits and lending to businesses.

Investment Banking in Indonesia

According to DBS Indonesia, it provides a wide range of investment banking


services in collaboration with DBS Vicker Securities Indonesia and DBS Bank. The
invesment banking services includes:

Capital Markets
• Deliver comprehensive capital markets capabilities to Indonesian
corporations in strategic partnership with DBS Vickers Securities Indonesia.
DBS is a recognized leader in regional capital markets, and it has been
providing well respected debt & equity financial solutions to Indonesian
corporations. DBS Vickers Securities Indonesia is amongst Indonesia’s top
stockbrokers and is licensed to underwrite both equity and debt securities
by BAPEPAM.

Advisory Services

• DBS also provides advisory services through its Merger & Acquisition
division assisting and advising leading Indonesian corporations to meet their
strategic corporate objectives regionally.