Beruflich Dokumente
Kultur Dokumente
Private Placements: The entire issue is sold to a small, select group of investors. This is rarely done with equity issues.
Facebook e.g.
Book runner- initially expected was Goldman Sachs but eventually won by Morgan Stanley. Co-managers 12 other prestigious banks. Fees -1.1% which is about $176 million. Usually other banks earn about 7% fee.
Users of capital
Corporations Governments Municipalities
Investment Banking
Providers of Capital
Individuals Pension Funds Insurance Companies Asset Managers Corporate Treasuries Sovereign Wealth Funds
Private side
Public side
Advisory
Mergers & Acquisitions o Buyside o Sellside o Spin-offs / Splitoffs / Carveouts o Hostile defense o Hostile takeovers / proxy fights o Joint Ventures Restructuring Ratings
Other services
Full-Service Brokers v/s Discount Brokers
Divestitures
A demerger (the opposite of merger) involves divestitures. It is the splitting up of a corporate body into two or more separate and independent bodies.
Some of the reasons for divestitures/demerger could be: i. A subsidiary/associate/investment is not adding value or eroding value. The buyer may be the management of the subsidiary, i.e., management buyout; ii. A subsidiaries/associate/investment does not or longer fits in with the groups strategic plan;
iii. Subsidiaries/associates/investment with high risk could be sold to reduce the business risk of the group as a whole iv. To profit from the sale of the subsidiaries/associate/investment
In Malaysia, divestitures are more commonly known as disposals.Disposals by a corporation may be in the form of fixed assets such as plant and equipment, land and properties,etc When a company decides to divert part of its operations, it will try to get the highest value by selling off the business unit, or selling individual assets
The traditional aspect of investment banks which involves helping customers raise funds in the Capital Markets and advising on mergers and acquisitions. Investment bankers prepare idea pitches that they bring to meetings with their clients With the expectation that their effort will be rewarded with a mandate when the client is ready to undertake a transaction. Once mandated, an investment bank is responsible for preparing all materials necessary for the transaction as well as the execution of the deal, which may involve subscribing investors to a security issuance, coordinating with bidders, or negotiating with a merger target.
INVESTMENT MANAGEMENT
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
investors (both directly via investment contracts and more commonly via collective investment schemes, mutual funds)
private
Is often the most profitable area of an investment bank. responsible for the majority of revenue of most investment
banks
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.
RESEARCH
The
sales force in suggesting ideas to customers, and investment bankers by covering their clients. In recent years the relationship between investment banking and research has become highly regulated, reducing its importance to the investment bank.
RISK MANAGEMENT
Carried out at 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).
BACK OFFICE
Operations
involves data-checking trades that have been conducted, ensuring that they are not erroneous, and transacting the required transfers. While it provides the greatest job security of the divisions within an investment bank
It
is a critical part of the bank that involves managing the financial information of the bank and ensures efficient capital markets through the financial reporting function. The staff in these areas are often highly qualified and need to understand in depth the deals and transactions that occur across all the divisions of the bank.
Middle Market
Boutiqu e
Low
Capabilities
High
Credit Rating
Definition
Evaluation of the timely repayment ability of an individual, firm, of debt security (such as a bond).
Rating Methodology
The main factors that are analysed into detail by the credit rating agencies. 1. Business Risk Analysis 2. Financial Analysis 3. Management Evaluation 4. Geographical Analysis 5. Regulatory and Competitive Environment 6. Fundamental Analysis
Financial Analysis
This includes an analysis of 4 important factors namely: a. Accounting quality b. Earnings potential/profitability c. Cash flows analysis d. Financial flexibility
Management Evaluation
Management goals, plans and strategies, Capacity to overcome unfavourable conditions, Staffs own experience and skills, Planning and control system etc.
Geographical Analysis
To determine the locational advantages enjoyed by the issuer company Benefits of diversification Benefit of lower cost of operation
Fundamental Analysis
1. Liquidity management :study of capital structure, availability of liquid assets , matching of assets and liabilities. 2. Asset quality :credit risk management, exposure to individual borrowers and management of problem credits etc. 3. Profitability and financial position :past profits, funds deployment, revenues on non-fund based activities 4. Interest and tax sensitivity :sensitivity of company due to the changes in interest rates and changes in tax law.
Overall fundamentals and earnings capacity Overall macro economic and business environment Liquidity position of the company Financial flexibility of the company Guarantee/support from
financially strong external bodies Level of existing leverage (borrowings) & Financial risk
Pricing
Regulatory Requirements
Credit ratings are critical to the activities of securities markets, as they are dependent on to create and manage investment portfolios, the pricing of new securities, trading of securities, financial contracts (and loans) and for some financial institutions to meet regulatory requirements.
Benefits to Company
Easier to raise funding Reduced cost of borrowing Reduce cost of public issues Ratings can build up image Ratings facilitates growth Recognition to unknown companies
Benefits to Intermediaries
For brokers ratings make it easier to persuade clients to select an investment proposal of investment in highly rated instruments.
ICRA - Promoted by IFCI. Moodys, the other global rating major, has
recently taken a small 11% stake in ICRA.
CARE - Promoted by IDBI. Duff and Phelps(Fitch) - Co-promoted by Duff and Phelps, the worlds
4th largest rating agency.
CRISIL is believed to have about 42% market share followed by ICRA with about 36%, CARE with 18% and Fitch with 4%
CARE BBB
Experienced promoter group and management Approval of the natural gas pricing formula by the Oil Ministry Dominant leadership position in the petrochemical segment Strong financial risk profile characterized by robust capital structure and liquidity profile
Lower than envisaged utilization of recently commenced manufacturing facilities in India and China Stressed liquidity with continued reliance on short term unsecured borrowings
Broking
Services offered by people / firms for buying and selling securities
Broker
An individual / organization who are specially given license to participate in the securities market on behalf of clients Role of an agent Governed by SEBI Act, 1992, Securities Contracts (Regulation) Act, 1956
Other Tasks
Providing advisory services Offering limited banking services Brokering other securities
Charges Levied
Brokerage commissions Margin interest charges Service charges
Motilal Oswal ICICIdirect Share khan India bulls Geojit Securities HDFC Reliance Money Religare Angel Broking
Direct access brokers Dual advantage for traders direct access to the market Transactions carried out
Independent Brokers Not connected to any mutual fund company nor are they part of a chain brokerage Discount Service Brokerage Firm Deals with the trading aspect of managing investments for their customers
Online Discount Brokerage Firms Immediate trading Good investment services offered
Types of Brokers
Stock Broker Mortgage Broker Insurance Broker Commodity Broker Options Broker Real Estate Broker
Types of Services
Advisory Services Expensive Have to maintain good relationship and contact Provides financial consultant and financial advisory services Range of products to buy E.g. Bonds, MF, ETF, CD etc. Discretionary Management Expensive Have to maintain good relationship and contact Takes complete control over the investment Takes investment decision on behalf of customers and provides
only periodic statements to the customers.
Custodial Account: brokerage account for a minor that requires parent or guardian to handle transactions
Cash Account: brokerage account that can only make cash transactions
Margin Account: brokerage account in which the brokerage firms extends borrowing privileges Wrap Account: account that shifts investment decisions to a professional money manager and charges a flat annual fee
Round-lot Orders
Market Orders Limit Orders Fill-or-Kill Orders Day Orders Good-til-Cancelled (GTC) Orders Stop-Loss (Stop) Orders Stop-Limit Orders
Competition
Banks give brokers tough time in third party products sale Bigger broker networks can compete with the big banks The non bank lending sector will disappear when the exit fee is banned
Challenges
Drivers
THANK YOU