VIVEK COLLEGE OF COMMERCE
CHAPTER 1: INTRODUCTION TO INVESTMENT

BANKING
1.1 INTRODUCTION
An investment bank is a financial institution that assists corporations and

governments in raising capital by underwriting and acting as the agent in the
issuance of securities. An investment bank also assists companies involved
in mergers and acquisitions, derivatives, etc. Further it provides ancillary
services such as market making and the trading of derivatives, fixed income
instruments, foreign exchange, commodity, and equity securities. Unlike
commercial banks and retail banks, investment banks do not take deposits.
To provide investment banking services in the United States an advisor must
be a licensed broker-dealer. The advisor is subject to Securities & Exchange
Commission (SEC) (FINRA) regulation. Until 1999, the United States
maintained a separation between investment banking and commercial banks.
Other industrialized countries, including G7 countries, have not maintained
this separation historically. Trading securities for cash or securities (i.e.,
facilitating transactions, market-making), or the promotion of securities (i.e.,
underwriting, research, etc.) was referred to as the "sell side".
Investment banking is a particular form of banking which finances capital

requirements of enterprises. Investment banking assists as it performs IPOs,
private placement and bond offerings, acts as broker and carries through
mergers and acquisitions.
INVESTMENT BANKING Page 1

1.2 INDUSTRY DEFINITIONS
• Investment Banking and Securities Dealing - This industry comprises

establishments primarily engaged in underwriting, originating, and/or
maintaining markets for issues of securities. Investment bankers act as
principals (i.e., investors who buy or sell on their own account) in
firm commitment transactions or act as agents in best effort and
standby commitments. This industry also includes establishments
acting as principals in buying or selling securities generally on a
spread basis, such as securities dealers or stock option dealers.
• Proprietary trading is a term used in investment banking to describe
when the firm's traders actively trade stocks, bonds, options,
commodities, or other items with its own money as opposed to its
customers' money, so as to make a profit for itself.
• The Bank for International Settlements (BIS) - international
organization which fosters international monetary and financial
cooperation and serves as a bank for central banks.
1.3 EVOLUTION OF INVESTMENT BANKING
Origin
In India, though the existence of this branch of financial services can be

traced to over three decades investment banking was largely confined to
merchant banking services. The forerunners of merchant banking in India
were the foreign banks. Grindlays bank (now merged with standard
chartered bank in India) began merchant banking operations in 1967 with a
licence from the RBI followed by the Citibank in 1970. These two banks

were providing services for syndication of loans and raising of equity apart
from other advisory services.
It was in 1972 that the Banking Commission Report asserted the need for
merchant banking services in India by the public sector banks. Based on the
American experience, which led to the passage of the Glass-Steagall Act, the
commission recommended a separate structure for merchant banks distinct
from commercial banks and financial institutions. Merchant banks were
meant to manage investments and provide advisory services.
Following the above recommendation, the SBI set up its merchant banking
division in 1972. Other banks such as the Bank of India, Central Bank of
India, Bank of Baroda, Syndicate bank, Punjab National Bank, Canara Bank
followed suit to set up their merchant banking outfits. ICICI was the first
financial institution to set up its merchant banking division in 1973. The
later entrants were IFCI and IDBI with the latter setting its merchant
banking division in1992. However, by the mid eighties and early nineties,
most of the merchants banking divisions of public sector banks were spun
off as separate subsidiaries. SBI set up SBI Capital Markets Ltd in1986.
Other such as Canara Bank, BOB, PNB, Indian Bank and ICICI Crated
separate merchant banking entities. IDBI created IDBI Capital markets
much later since merchant banking was initially formed a division of IDBI
in 1992.
1.4 GROWTH OF INVESTMENT BANKING

Merchant banking in India was given a shot in the advent of SEBI in 1988.
And the subsequent introduction of free pricing of primary market equity
issues in 1992.However, post-1992, the merchant banking industry was
largely driven by issue management activity which fluctuated with the trends
in the primary market. There have been phases of hectic activity followed by
severe downturn in business. SEBI started to regulate the merchant banking
activity in 1992 and majority of the merchant bankers registered with SEBI
were either in issue management or associated activity such as underwriting
or advisorship. SEBI had four categories of merchant bankers with varying
eligibility criteria based on their networth. The highest number of registered
merchant bankers with SEBI was seen in the mid-nineties but the numbers
have dwindled since due to the inactivity in the primary market.
1.5 CONCEPT OF INVESTMENT BANKNG
The banking scenario in India is itself huge, covering the different

facets of the economy. By and large, investment banks in India are
itself an institution which generates funds in two different ways. The
first manner in which it works is by drawing public funds via the
capital market by way of selling stock in their company. The other way
in which it operates is to seek for venture capital or private equity, as a
substitute for a stake in their company.
In a very broad perspective, “Investment banking” as the term suggests is
concerned with the primary function of assisting the capital market in its
function of capital intermediation, i.e, the movement of financial resources
from those who have them to those who need to make use of them for
generating GDP. At the macro level, banks and financial institutions on one

hand and the capital market on the other are the two broad platforms of
institutional intermediation for capital flows in the economy. Therefore, it
can be inferred that investment banks are the counterparts of banks in the
capital market in discharging the critical function of pooling and allocation
of capital.
The ‘Dictionary of Banking and Finance defines ‘investment bank’ as
a term used in the US to mean ‘a bank which deals with the underwriting of
new issues and advises corporations on their financial affairs’. This
definition obviously captures the core activity of an investment bank
pertaining to capital market floatations and financial advisory service to
corporations. A broader definition is provided by Bloomberg which defines
an investment bank as a ‘financial intermediary that performs a variety of
services, including aiding in the sale of securities, facilitating mergers and
other corporate re-organisations, acting as brokers to both individual and
institutional clients and trading for its own account.
1.6 BACKGROUND
Investment banking is the term used to describe the business of raising

capital for companies. When firms need cash in order to grow and expand
their businesses, Investment banks help companies and governments (or
their agencies) raise money by issuing and selling securities in the capital
markets (both equity and debt). Almost all investment banks also offer
strategic advisory services for mergers, acquisitions, divestiture or other
financial services for clients, such as the trading of derivatives, fixed
income, foreign exchange, commodity, and equity securities. The primary
function of an investment bank is buying and selling products both on behalf

of the bank's clients and also for the bank itself. Banks undertake risk
through proprietary trading, done by a special set of traders who do not
interface with clients and through Principal Risk undertaken by a trader after
he or she buys or sells a product to a client and does not hedge his or her
total exposure. Banks seek to maximize profitability for a given amount of
risk on their balance sheet.
1.7 BUSINESS PORTFOLIO OF INVESTMENT BANKS

Globally investment banks handle significant fund-based business of
their own in the capital market along with their non-fund service portfolio,
which is offered to clients. However, these distinct segments are handled
either on the same balance sheet or through subsidisries and affiliates
depending upon the regulatory requirements in the operating environment of
each country. All these activities are segmented across three broad
platforms--- (a) equity market activity, (b) debt market activity and (c)
merger and acquisitions (M&A) activity. In addition, given the structure of
the market, there is also a segmentation based on whether a particular
investment bank belongs to a commercial banking parent or is a stand-alone
pure investment bank.
As far as the US investment banks are concerned, core investment banking
(underwriting, issue management, marketing and research), securities
portfolio (proprietary trading and investment), brokerage, asset management
and advisory services are the main contributors to their revenue. Merrill
lynch being a pure investment bank, derives a higher proportion of its
income from secondary market brokerage. Its highest revenue earner is
however proprietary trading and investment. Morgan Stanley earns almost
equal revenues from investment banking and asset management though its

highest revenue is again from proprietary trading and investment. In general,

it is found that proprietary trading and investment contribute the largest
revenue to US investment banks.
Investment banks play a lead advisory role in this booming segment of
financial advisory business. It may be appreciated that investment banking
encompasses a wide area of capital market based businesses and services
and has significant financial exposure to the capital market. Though
investment banks also earn a significant component of their income from
non-fund based activity, it is their capacity to support clients with fund-
based services, which distinguishes them from pure merchant banks. In the
US capital market, investment banks underwrite issues to buy them outright
and sell them to investors thereby taking upon themselves significant
financial exposure to client companies.
1.8 CHARACTERISTICS AND STRUCTURE OF INDIAN
INVESTMENT BANKING INDUSTRY
• Investment banking in India has evolved in its own characteristic
structure over the years both due to business realities and the
regulatory regime.
• On the regulatory front, the Indian regulatory regime does not
allow all investment banking functions to be performed under one
legal entity for two reasons ---- (a) to prevent excessive exposure
to business risk under one entity and (b) to prescribe and monitor
capital adequacy and risk mitigation mechanisms.
• Therefore bankruptcy remoteness is a very feature in structuring
the business lines of an investment bank so that the risks and
rewards are defined for the investors who provide resources to the
investment banks.

• In addition, the capital adequacy requirements and leveraging

capability for each business line have been prescribed differently
under relevant provisions of law.
• On the same analogy, commercial banks in India have to follow
the provisions of the Banking Regulation Act and RBI regulations
which prohibit them from exposing themselves to stock market
investments and lending against stocks beyond specified limits.
• Indian investment banks follow a conglomerate structure by
keeping their business segments in different corporate entities to
meet regulatory norms.
• Investment banking in India has also been influenced by business
realities to a large extent. The other development is that due to the
gradual regulatory developments in the capital markets investment
baking activities came under regulations which required separate
registration, licensing and capital controls.
• Due to the above reasons, Indian investment banking industry has
a heterogeneous structure. The bigger investment banks have
several group entities in which the core and non-core business
segments are distributed.
• The heterogeneous and fragmented structure is evident even if
Indian investment banks are classified on the basis of their activity
profile.
• They also have full service investment banking subsidiaries under
their fold. There are no global Indian investment banks although
there is a bulge bracket of investment banks in India has some
overseas presence to serve Indian issuers and their investors.

1.9 MARKET STRUCTURE
Demand is driven by economic activity that results in company mergers,

acquisitions, or public financing. The profitability of an investment bank
depends on its ability to accurately assess both the value of a business
transaction and the readiness of the market to buy the attendant debt or
equity. Big firms have an advantage because large customer transactions
require firms with substantial financial resources. Small investment banks
can compete by participating in syndications and operating in regional
markets or specialized industries. Although labor-intensive, the industry
produces very high value: average annual revenue per employee at large
firms is close to $1 million.
The primary revenue sources of the investment banking industry are from
the placement of new debt and equity issues with public and private
investors, and the fees associated with mergers and acquisitions (M&A).
Investment banks also purchase new debt and equity issues for their own
accounts, acting as the market ‘maker,’ and actively trade other financial
instruments. Most investment banks are active securities and currency
traders and also provide asset management services for wealthy clients and
retirement and investment funds. Thirty percent of industry revenue comes
from merger and acquisition fees and associated stock transactions, 15
percent from helping corporations and governments issue bonds, 20 percent
from active trading in financial instruments and 10 percent from interest
income.

Complying with mandated regulations like Basel II and incorporating

frameworks like Straight Through Processing (STP) present challenges for
investment banking industry in addition to low margins, workflow
disconnects, and data redundancies.
1.10 FUNCTIONS OF INVESTMENT BANKING:
Investment banks have multilateral functions to perform. Some of the most

important functions of investment banking can be jot down as follows:
• Investment banking help public and private corporations in issuing
securities in the primary market, guarantee by standby underwriting or
best efforts selling and foreign exchange management. Other services
include acting as intermediaries in trading for clients.
• Investment banking provides financial advice to investors and serves
them by assisting in purchasing securities, managing financial assets
and trading securities.
• Investment banking differs from commercial banking in the sense that
they don't accept deposits and grant retail loans. However the dividing
lines between the two fraternal twins have become flimsy with loans
and securities becoming almost substitutable ways of raising funds.
• Small firms providing services of investment banking are called
boutiques. These mainly specialize in bond trading, advising for
mergers and acquisitions, providing technical analysis or program
trading.

1.11 CONFLICT INTEREST IN INVESTMENT BANKING

The conflict could arise if the research analyst promotes a share, the
public offering for which is being handled by the merchant bank.
Alternatively, it could also be that the analyst is privy to insider information
from the merchant banking division and there upon issues recommendations
that could amount to fraudulent deceit of investors or gains for select few.
Over the years, the firewalls between investment bankers and research
analysts melted especially in the heart of the IPO and the internet boom. The
compensation patterns of the investment bankers and the research analyst s
were also getting complementary to an extent thus undermining their
independence.
The study disclosed two main areas on conflict—(a) research
recommendations tending to become marketing tools for merchant banking
assignment by the same bank and analysts getting paid share of such
investment banking gains,(b) ownership of stocks by research analysts in
the companies that they recommend or research. The study disclosed that
analysts leveraged their position in pumping up recommendations in
companies that they are interested in when they went public.
One of the main provisions is that analysts have to disclose their interests in
their recommendations. In addition, there is sought to a water tight
compartment in the working of the investment banking departments and the
research divisions. The third area has been the regulation of compensatory
structures for research analysts based on the profits of the merchant banking
divisions.
Due the over dependence on issue management activity in the initial years,
most merchant banks perished in the primary market downturn that followed

later. In order to stabilize their business, several merchant banks diversified

to offer a broader spectrum of capital market services. However, Other than
a industry leaders, the others merchant banks could not transform themselves
into full service investment banks. Going by the service portfolio of the
leading full service investment banks in India, it may be said that the
industry in India has seen more of less similar development as its western
counterparts, though the breadth available in the overseas capital market is
still not present in the Indian capital market. Secondly, due to the lower
availability institutional financing to fund capital market activity, it is only
the bigger industry players who are in full service investment banking. The
third major deterrent has been the inadequate breadth in the secondary
market, especially in the corporate debt segment. Though there are about
5000 listed companies on the BSE and about 1500 companies listed on the
NSE, the actively traded scrips are far below these numbers.
1.12 INVESTMENT BANKING VS COMMERCIAL BANKING
If a company (or any other entity) wants to raise money, the company has
two options: 1) borrow from a commercial bank or 2) issue stock or bonds in
the capital markets. In order to take advantage of the capital markets, the
company or other entity needs an investment banker. The investment banker
buys the company's stocks or bonds and then tries to resell them to interested
investors (like mutual funds, pension funds, or individual investors). The
process is called underwriting securities. The investment bank gives the
issuing company needed funds, and takes on the risk (sometimes substantial
risk) of owning the securities. The process is risky because the bank may not
be able to sell the securities later and thus would lose a lot of money. The
bank also provides services such as setting up deals between merger and

acquisition partners. The investment bank makes money on the later sale of
these securities.
A commercial bank on the other hand is in business to do two main things:

hold deposits and make loans. The commercial bank creates money by
lending out deposits to individuals seeking a loan for some designated
purpose (for example, a car loan or a loan to start a small business). The
commercial bank also keeps deposits on hand for individuals wishing to use
the money to make payments (like a checking account). The commercial
bank makes profit by lending out to individuals and other entities and
collecting payments from these borrowers for principal and interest.

CHAPTER 2: ROLE OF AN INVESTMENT BANK
2.1 INTRODUCTION
The major work of investment banks includes a lot of consulting. For

instance, they offer advices on mergers and acquisitions to companies. The
other arena where they give advice are tracking the market and determining
when should a company come out with a public offering and what is the best
possible way to manage the public assets of businesses. The role that an
investment bank plays sometimes gets overlapped with that of a private
brokerage house. The usual advice of buying and selling is also given by
investment banks.
There is no demarcating line between the investment banking and other

forms of banking in India. This has been observed majorly of late. All banks
nowadays want to provide their customers the best of services and create a
niche for themselves and that is why apart from investment banks, all other
banks too are aiming at making it big.
At the macro level, investment banking is related with the primary function
of assisting the capital market in its function of capital intermediation, i.e.,
the movement of financial resources from those who have them (the
investors), to those who need to make use of them for producing GDP (the
issuers). Over the decades, investment banks have always suited the needs of
the finance community and thus become one of the most vibrant and
exciting segment of financial services.

Globally investment banks handle significant fund-based business of their

own in the capital market along with their non-fund service portfolio which
is offered to the clients. All these activities are broadly segmented across
three platforms - equity market activity, debt market activity and merger and
acquisitions (M&A) activity. In addition, given the structure of the market,
there is also a segmentation based on whether a particular investment bank
belongs to a banking parent or is a stand-alone pure investment bank.
Investment banks provide four primary types of services: raising capital,

advising in mergers and acquisitions, executing securities sales and trading,
and performing general advisory services. Most of the major Wall Street
firms are active in each of these categories. Smaller investment banks may
specialize in two or three of these categories.
Raising Capital
An investment bank can assist a firm in raising funds to achieve a variety of

objectives, such as to acquire another company, reduce its debt load, expand
existing operations, or for specific project financing. Capital can include
some combination of debt, common equity, preferred equity, and hybrid
securities such as convertible debt or debt with warrants. Although many
people associate raising capital with public stock offerings, a great deal of
capital is actually raised through private placements with institutions,
specialized investment funds, and private individuals. The investment bank
will work with the client to structure the transaction to meet specific
objectives while being attractive to investors.

Mergers and Acquisitions
Investment banks often represent firms in mergers, acquisitions, and

divestitures. Example projects include the acquisition of a specific firm, the
sale of a company or a subsidiary of the company, and assistance in
identifying, structuring, and executing a merger or joint venture. In each
case, the investment bank should provide a thorough analysis of the entity
bought or sold, as well as a valuation range and recommended structure.
Sales and Trading
These services are primarily relevant only to publicly traded firms, or firms
which plan to go public in the near future. Specific functions include making
a market in a stock, placing new offerings, and publishing research reports.
General Advisory Services:
Advisory services include assignments such as strategic planning, business

valuations, assisting in financial restructurings, and providing an opinion as
to the fairness of a proposed transaction.
2.2 NEEDS OF AN INVESTMENT BANK
Any firm contemplating a significant transaction can benefit from the advice
of an investment bank. Although large corporations often have sophisticated
finance and corporate development departments, an investment bank
provides objectivity, a valuable contact network, allows for efficient use of
client personnel, and is vitally interested in seeing the transaction close.

Most small to medium sized companies do not have a large in-house staff,
and in a financial transaction may be at a disadvantage versus larger
competitors. A quality investment banking firm can provide the services
required to initiate and execute a major transaction, thereby empowering
small to medium sized companies with financial and transaction experience
without the addition of permanent overhead.
2.3 CRITERIA FOR CHOOSING AN INVESTMENT BANK
Investment banking is a service business, and the client should expect top-
notch service from the investment banking firm. Generally only large client
firms will get this type of service from the major Wall Street investment
banks; companies with less than about $100 million in revenues are better
served by smaller investment banks. Some criteria to consider include:
Services Offered
For all functions except sales and trading, the services should go well
beyond simply making introductions, or "brokering" a transaction. For
example, most projects will include detailed industry and financial analysis,
preparation of relevant documentation such as an offering memorandum or
presentation to the Board of Directors, assistance with due diligence,
negotiating the terms of the transaction, coordinating legal, accounting, and
other advisors, and generally assisting in all phases of the project to ensure
successful completion.

Experience
It extremely important to make sure that experienced, senior members of the

investment banking firm will be active in the project on a day-to-day basis.
Depending on the type of transaction, it may be preferable to work with an
investment bank that has some background in your specific industry
segment. The investment bank should have a wide network of relevant
contacts, such as potential investors or companies that could be approached
for acquisition.
Record of Success
Although no reputable investment bank will guarantee success, the firm

must have a demonstrated record of closing transactions.
Ability to Work Quickly
Often, investment banking projects have very specific deadlines, for

example when bidding on a company that is for sale. The investment bank
must be willing and able to put the right people on the project and work
diligently to meet critical deadlines.
Fee Structure
Generally, an investment bank will charge an initial retainer fee, which may
be one-time or monthly, with the majority of the fee contingent upon
successful completion of the transaction. It is important to utilize a fee
structure that aligns the investment bank's incentive with your own.

Ongoing Support
Having worked on a transaction for your company, the investment bank will
be intimately familiar with your business. After the transaction, a good
investment bank should become a trusted business advisor that can be called
upon informally for advice and support on an ongoing basis.
Because investment banks are intermediaries, and generally not providers of

capital, some executives elect to execute transactions without an investment
bank in order to avoid the fees. However, an experienced, quality investment
bank adds significant cant value to a transaction and can pay for its fee many
times over.
The investment banker has a vested interest in making sure the transaction
closes, that the project is completed in an efficient time frame, and with
terms that provide maximum value to the client. At the same time, the client
is able to focus on running the business, rather than on the day-to-day details
of the transaction, knowing that the transaction is being handled by
individuals with experience in executing similar projects.

CHAPTER 3: ORGANIZATIONAL STRUCTURE OF AN

INVESTMENT BANK
3.1 INTRODUCTION
The modern investment bank is seldom organized in the form of a

corporation, but rather as a partnership including from two to twenty
members. In addition, large commercial banks have either opened bond
departments or have organized separate companies which perform all the
functions of investment houses.
The investment bank may emphasize certain features of its business more
than others, and so its organization varies accordingly. It usually includes
buying, selling, statistics and treasury departments. The function of the
buying department is to investigate the various proposals submitted by
corporations or other investment houses and to buy the securities if
conditions warrant such action. The buying departments of large investment
houses usually maintain close contact with industries in which they are
interested. Also a large firm keeps itself informed through traveling
representatives, who report conditions in these enterprises.
After the securities are purchased they are turned over to the selling
department. This is headed by a general sales manager, who directs the work
of salesmen and, at times, the operation of the branch offices. The majority
of sales are made by representatives who travel through the territory allotted
to them, build up a regular clientele, and thus dispose of new issues of

securities. Each salesman keeps in touch with the home office and reports
regularly to the sales manager. If a salesman shows ability he is frequently
placed in charge of a branch office and is allowed to participate in the profits
of the business.
The sales force receives considerable assistance from the statistical

department, which compiles lists of customers, securities already purchased
by them, and their preferences in investments. The department aids in
conducting a sales campaign by preparing circulars and press notices. This
department also answers customers' inquiries for information on
investments. Another important task of the statistical department is to
analyze proposals submitted to the consideration of the investment house.
The treasury department is concerned with such fiscal affairs as the securing
of loans from banks and the carrying of accounts of customers who purchase
securities on a marginal basis or on an installment plan.
3.2 MAIN ACTIVITIES AND UNITS
An investment bank is split into the so-called 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 services 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. 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
Front office
• 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 M&A's aka 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, project
finance, asset finance and leasing, structured finance, restructuring,
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.
• Research is the division which reviews companies and writes reports

about their prospects, often with "buy" or "sell" ratings. While the
research division may or may not generate revenue (based on policies
at different banks), its resources are used to assist traders in trading,
the sales force in suggesting ideas to customers, and investment
bankers by covering their clients.
Other businesses that an investment bank may be involved in
• Global transaction banking is the division which provides 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.Current examples includes Goldman Sachs Capital Partners and
JPMorgan's One Equity Partners. (Originally, "merchant bank" was
the British English term for an investment bank.)
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 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 involve 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
purposes.

CHAPTER 4: DEVELOPMENT OF THE INVESTMENT

BANK
4.1 INTRODUCTION
Investment bankers originated in the Middle Ages, when governments and

kings received long-term loans for conducting wars and maintaining courts.
Notable among the early money lenders were the Hansa merchants who
supplied funds to many of the European kings and emperors, but usually
with assurance of return. The ruler received a certain sum of money in the
form of gold or silver bullion, and in return he gave the lender the rights
over revenue derived from tariffs or taxes for a certain period of years.
Loans were also extended on real property such as mines, fisheries, and
forests owned by the government, and the products of the mines were
applied to the payment of principal and interest. These early magnates were
also merchants, and they were able to use their own money directly in
granting loans, and in this way they differed from the modern investment
bankers who act as intermediaries in gathering the funds of others for
making advances to borrowers. With the close of the Napoleonic wars
financial supremacy shifted from Amsterdam and the Continent to London,
and with this change the modern investment bank as an intermediary
institution between borrower and lender was developed.
The same general evolution was repeated in the financial history of the
United States. During the first quarter of the nineteenth century American
states and municipalities secured whatever capital they needed from

merchants. During the second quarter, the westward movement caused an

extension of such internal improvements as canals and railroads, and capital
for these purposes was raised mainly from investors in England and in other
European countries. Securities marketed in this country consisted largely of
municipal bonds which were sold, usually without public notice, to local
bankers who in turn marketed them among insurance companies, savings
banks, and private investors. In order to secure a better price for bonds,
municipalities began to advertise their new issues and their sales were
conducted on a competitive basis. Blocks of these bonds were purchased by
individuals for the purpose of selling them on a retail basis, and these
individuals thus performed in a small way the mediation function of the
modern investment bankers.
The development of free banking encouraged the organization of many

banks, and until the opening of the Civil War there was considerable
investment of capital in bank stock. After the Civil War the growth of
transcontinental railways led to the issue of large blocks of bonds which
were absorbed by American and European investors, whose contributions of
capital made possible also the organization and development of great
industrial trusts at the opening of the twentieth century. The war changed the
movement of capital between Europe and America. At first a large
proportion of American railroad and industrial securities held abroad were
repurchased, and later the war obligations of the European governments
found a market in the United States.
4.2 INVESTMENT BANKER

Every one of us wants our funds to be in secure hands, in addition to

fetching the finest of returns through any type of investment. Not many of us
have adequate time to personally go through and comprehend each and
every aspect of investing. This situation calls for seeking help from a
professional to make the investment decisions for us. An investment banker
comes handy in such situations, with exposure to various aspects of financial
investments.
An investment banker is a person who is either an agent or an underwriter

acting as a liaison between the investor and the issuer of new securities such
as municipalities and corporations that issue the securities. An investment
banker along with other investment bankers forms a syndicate and buys the
new securities issued totally and later sells it to either organizations or
individuals.
The job of an investment banker is very interesting and with the right kind of
knowledge and smartness, investment bankers can reach the road to success.
• The foremost job of an investment banker is to interact with the client

and advice him on the various aspects of investing.
• They help organizations in bringing out bonds and securities and

selling the same to the general public by acting as mediators in
between the organization and the general public.
• They help organizations by working out strategies on takeovers and

acquisitions.

• Their proficiency in financial analysis and strong economics

background along with strategic skills helps them develop into the
best financial guides for their clients by planning and executing
prudent financial decisions for them.
• They prepare financial analysis and documents to support both clients

and organizations that seek their help.
• They work with institutions that lend money to clients by reforming

debt plans, refinancing debts and raising fresh debts.
• They work with clients for equity capital markets by giving them the
guidance on how to raise the capital and from where and when.
4.3 HOW TO BECOME AN INVESTMENT BANKER
An investment banker is an individual who works with both large

corporations and smaller companies to develop business deals. This includes
applying for corporate loans, finding investors and selling stock shares.
Investment bankers also handle the transfer of ownership between
companies. To become an investment banker, you need to prepare yourself
for long hours of meticulous work. A clear understanding of the business
world and stellar analytical and communication skills are also required.
1. Earn your Bachelor's degree from an accredited college or university.

Choose a major in a finance-related field, such as business
administration, economics, marketing or math.
2. Sharpen oral communication skills with course work in speech or
broader communications classes. Become a confident speaker, as

investment bankers make frequent presentations to clients to attempt

to gain their business.
3. Take classes specializing in business or proposal writing. One of your
tasks as an investment banker may be writing proposals to outline
how a business deal will progress.
4. Follow trends in the investment banking industry by reading financial
newspapers and journals. This is a good way to find current job
postings as well. Knowing the environment and especially the history
of a company with which you are interviewing is more likely to make
good impressions on the interviewer.
5. Think traditional and conservative when preparing to apply and
interview for investment banking jobs. Print your resume, cover letter
and thank you letters on unadorned resume paper. Wear appropriate
business attire when meeting with a prospective employer.
6. Consider entering the field at an entry or lower level position such as
an analyst. It is difficult to break into the industry of investment
banking, but gaining some solid work experience at a large, reputable
firm may make it easier.
7. Continue your education if you are not satisfied with the results of
your job search. While not necessary for every investment banker
position, a Master's in Business Administration (MBA) is quickly
becoming a requirement for some highly sought-after jobs and is
highly recommended.
INVESTMENT BANKER TRAINING
Two years of MBA, specializing in the stream of finance after completing

college is the requirement to be an investment banker. Additional

qualification in the field of accountancy and law is an added advantage.

Candidates once recruited are given on-the-job training and specialized
training in any particular field if they have been recruited specifically.
Holding a professional qualification, such as a specialization from the

Chartered Institute of Bankers, The Institute of Chartered Secretaries and
Administrators or from any Financial Services Authority can add an edge to
the profession of investment banker. These institutes conduct courses and
qualifying examinations in investment or securities business. There are firms
that encourage their employees to take up such courses during the day by
giving them some time off.
• People start their career as trainees and later get absorbed as analysts
and stay in that slot for a minimum of three years.
• After gaining sufficient experience, they become fund managers at

associate levels.
• They get promoted as vice presidents in another three years time,

depending on their skills and contribution.
• Successful investment bankers get to travel extensively around the

world for official dealings.
SKILLS FOR AN INVESTMENT BANKER
• Strong numerical and analytical skills.
• Consummate oral and written communication skills.

• Keep updated with current market trends
• Skillful negotiator
• Team player
• Maintaining effective operational relations with clients.
• Performance under pressure
REMUNERATION OF AN INVESTMENT BANKER
Remuneration is attractive and as recruits climb the ladder of success into

higher categories, they get paid better. Usually the number of hours in work
is much more when compared to other fields. Recruits are encouraged by
way of bonus that is paid annually i.e. remuneration based on the
performance of the recruit or profit made by the firm is shared among
employees.
Investment banking is a market driven field of work and thus is primarily

governed by the market scenario. Few things that influence the prospects of
an investment banker are
• Global economy, markets are the key to this job and when markets are
suffering so does the job prospect of an investment banker.
• Enviable salaries and smart incentives have stamped a competitive

edge to this area of work and thus job seekers in this field are more
than the jobs themselves.

INVESTMENT BANKER PROSPECTS

Investment banking is a market driven field of work and thus is primarily
governed by the market scenario. Few things that influence the prospects of
an investment banker are
• Global economy, markets are the key to this job and when markets are
suffering so does the job prospect of an investment banker.
• Enviable salaries and smart incentives have stamped a competitive

edge to this area of work and thus job seekers in this field are more
than the jobs themselves.
4.4 CHOOSING AN INVESTMENT BANKER
Investment bankers can help you to sell your business, but not all investment
bankers are created equal. Here are attributes to look for when you are
choosing an investment banking firm.
Most business owners approach the task of selling their company in

traditional terms, crossing their fingers and hoping for the best in the
commercial marketplace.
If that approach doesn't sound appealing, you may have another
alternative. But to get there, you're going to need the help of an investment
banker.
An investment banker is an agent for an organization that helps private

companies convert ownership equity into securities in the primary market.
By issuing an IPO (Initial Public Offering), a good investment banker can be

a godsend, raising significant capital for business owners and propelling the
company into its next stage of life.
The process typically goes something like this: A company selects an

investment banker, who in turn guarantees the company a specific amount of
capital minus a fee. The investment banker then proceeds to raise the
guaranteed capital through the IPO, but assumes all of the risk should the
IPO fail to attract the necessary investors. Not a bad deal, right?
In reality, the success of your relationship with an investment banker will

depend largely on two factors: Your company's stage of life and the quality
of the investment bank itself. Investment banks are most interested in
established, mature companies. Although younger start-ups can conceivably
attract an investment banker, the pool of potential candidates will likely be
substantially smaller and the deal will be less beneficial for the business
owner.
If your company is well-established and mature, the only thing standing

between you and investment banking success is the selection of a top-rate
investment banker. Here are some of the most important characteristics to
look for when choosing investment bankers:
• Relationship - Relationships are built on trust, and a relationship with

an investment banker is no exception. You've got a lot riding on the
outcome of this relationship, so when screening potential investment
bankers you need to take into account the candidate's likeability,
communication style, and trustworthiness. If you don't mesh with an
investment banker during the initial interview, keep looking.

• Expertise - Investment bankers often specialize in certain industries

and market sectors. It's important to find an investment banker who
knows the ins and outs of businesses similar to yours, and is able to
value your company for what is truly worth. Remember: The
investment banker's job is to sell your business to potential investors.
The more he knows about your business the easier it will be for him to
attract investors, which translates into a higher amount of guaranteed
capital in your pocket.
• Experience - There is no substitute for experience in investment
banking. Since the nature of investment banking is somewhat
speculative, the person you choose to represent your company's
interests needs to be confident in his ability to bring in the highest
possible price in the IPO. Inexperienced investment bankers often lack
the confidence required to fight for your last dollar.
4.5 INVESTMENT BANKING CHALLENGES
“On the technology front, especially the large investment banks are facing
challenges in integrating different technology systems inherited through
earlier acquisitions,” he adds, during the course of a recent email interaction
with Business Line.
Expectations
The markets were expected to have a soft interest rate regime to support the
development of the money market and improve liquidity in the system. The

regulators across the globe have reduced the short- and long-term interest
rates to the record lows as expected.
In fact, in some of the developed countries such as the US and the UK, the
rates have been slashed more than expected. In our country, the bank rate
has been reduced from 7 per cent to 6 per cent, the cash reserve ratio from
7.50 per cent to 5 per cent, and the reverse repo rateto 3.25 per cent.
Investment banks expected stringent guidelines on risk management,
especially in counterparty, group/sector investment exposures other than
general credit and market risks.
Mark-to-market pricing of illiquid assets was a big challenge. Regulators

introduced FIMMDA (Fixed Income Money Market and Derivatives
Association of India) valuations and third-party valuations such as CRISIL
to help the market in fair price valuations. The introduction of Basel II
norms helped banks in undertaking better risk management practices.
Compliance with KYC (know your customer) norms, and the challenges in
monitoring AML (anti-money laundering) regulations were posing bigger
challenges.
The regulatory move of making PAN (permanent account number)

compulsory, and the introduction of Mapin (Market Participants and
Investors Number) by SEBI (Securities and Exchange Board of India)
helped banks adhere better to compliance standards and reduced the
challenges in aggregation of investment data of their customers.
Similarly the introduction of MiFID (Markets in Financial Instruments

Directive) in the European Union with the objective of best execution

strategies, compliance and reporting norms paved the way to reach global
customers with multiple products.
Present state
The move from regulated, segmented national financial markets to a single

global capital market has been gradual. The big drivers of growth in the past
ten years have been deregulation, the impact of technology, and the
innovation of new concepts such as trading in commodities, carbon and
securitisation. The markets have undergone unprecedented changes in the
last few years and business models are constantly under pressure to reinvent
themselves as new technology, regulations, and customer requirements
combine together to reinvent the industry. Over the past 10 years, we've seen
transformative power in how investments in IT (information technology)
innovations foster economic growth.
But what determined the length and severity of the recession is the way the
governments responded to restore confidence among consumers, companies,
investors, and lenders.
The major challenge today for both buy-side and sell-side institutions are
how to meet their clients' expectations, especially on client reporting. The
market participants have learnt a lesson from this difficult period, and are
considering how to re-establish the confidence and how to make use of the
technology at its best.
A few years ago many were outsourcing client reporting function; this has
now reversed itself and more investment banks have preferred to retain this
function and are enhancing their in-house capabilities.

There is more emphasis on pre-trade analytics today because of the increase

in electronic trading which has introduced more technology into decision-
making and execution process.
Today, users expect pre-trade analytics to do a lot more than just identify
problem stocks. They want the analytics to support portfolio optimization,
rebalancing, credit risk analysis, interest rate analysis, cash flow forecasting,
compliance monitoring, and more.
Bankers should be looking at the moment with their risk management

procedures is not just looking at past conditions to predict the future, as this
has not proved reliable.
All financial firms have to some extent now realized the importance of
meeting tougher liquidity standards. Stress and scenario testing, especially
for liquidity risk, has become now both a regulatory obligation as well a key
fund management tool.
Going forward in 2010
The behaviour of interest rates is a central issue in the current economic

outlook. The current low level of long-term interest rates is contributing to a
very favourable global financial environment.
Despite the increase in inflation during recent weeks across the globe,
interest rates remain low for this stage of the business cycle. The stronger-
than-expected recoveries are likely to point to a rise in interest rates in the
first quarter of 2010 to curb potential inflationary pressures; and the

strengthening consumption and improving exports will herald an up-tick in

inflation next year.
There won't be any surprise if the regulators opt for over-regulation

especially in regulatory reporting to protect the industry from the lessons
learnt during the recession.
On the technology front, the large investment banks especially are facing
challenges on integrating different technology systems inherited through
earlier acquisitions. Many of them have already decided, or are in the
process of deciding, to integrate all such systems to make them work
together and standardise some processes under a common platform.

CHAPTER 5: ONLINE INVESTMENT BANK
Online investment banks nowadays provide companies with the option to

allocate their shares through an online auction process. Researches have
proved that turnover in the after market trading is significantly higher in the
case of online IPOs (Initial Public Offerings) as compared to traditional
ones. Electronic markets also have the advantages of increased
personalization and customization of IPOs according to one's needs.
Online Investment Bank- An Electronic Boom & Boon:
Information Technology has dramatically changed the structure of

markets in the last few years. The growth of Internet markets where public
and private organizations can sell their IPOs of corporate stock to investors
has been particularly spectacular. The first phase of cyber-trading started in
early 1999 with the advent of partial distribution of shares directly to
investors via the Internet. Now, the transition has made the actual
determination of offer price as well as allocation of shares a machine-
accessible process.

In the traditional IPO process, investment bank acted as an

intermediary between the sellers and buyers. The seller was the issuing firm
and the buyers consisted typically of large investors. The investment bank
was obliged to perform various services such as pricing the stock, forming
syndicates of investment banks to distribute shares and providing access
especially to large investors to ease distribution. It assessed interest in the
stock and took preliminary subscriptions from shares. This information was
used by the bank to determine the price and number of shares to sell. The
investment bank used to charge a fee (commission) for this service usually
based on the amount of money raised.
The type of service provided by online investment banks differ

chiefly in the functioning of the intermediary. This has become more
efficient as the digitization of services has reduced transaction costs. Their
initial role includes providing market access, price discovery and informing
a trustworthy investor. Then the online investment banks carry out final
price determination through a negotiation and ultimately selling it to the
highest bidder. This helps an individual investor to invest in a company
when it first raises capital from public. Bids are taken for a few weeks and
after that the offering price is fixed at the floor level so that all the shares can
be sold. An investor with a bid above the offer price can get as many shares
as he wishes upto a limit of 10% of the shares sold.
Although the underlying mechanics of IPO has remained more or less

intact, the whole process sails more transparently. The disintermediation
process has extenuated the desirability for brokerage. Both the offer price
and investors are determined by market.

Reasons for taking the online route:
• It is justifiable to know more about the firms that choose to distribute

a portion of their IPOs through the online investment bank route.
Findings show that the online investment banks employed by the
Internet IPOs are more reputed than those used by traditional
distribution methods. Also their CEOs are significantly younger.
• Internet IPOs have larger market value than those distributed by

traditional distribution methods.
• The firms that go public via the traditional distribution methods miss
out a lot of money. This is because conventionally the investment
banks bought the entire offering and under priced it by 15-20% below
the estimated market value. This helped them make a quick profit.
Also they had a huge 7% (non-negotiable) fee for carrying out the
whole process. Online investment banks have revolutionized the
unfair IPO game. They charge a fee of 4-5% as against the egregious
7% and the procedure of selling the IPO is also a lot fairer. A
computer ranks the bids submitted by investors for a fixed number of
shares and then the shares are allocated to the highest bidders. This
helps the market, not the investment banks to set the prices.
• Online investment banking helps to prevent 'spinning' i.e. allocating

shares to favored or potential customers thus precluding the average
investor from some securities of his interest. Spinning was practiced
by traditional investment banks to win future business from large
institutional investors.

• It is imperative that firms employ esteemed online investment bank.

This is because people have more faith on online IPOs distributed via
eminent banks.
• E-auction by online investment banks lowers the cost of investors to

obtain information about the reputability of the company issuing
shares and the price of shares. Also a tech-savvy investor can go
through all the IPOs available in the market and select his preferred
mix quickly. Creating an electronic market place has thus reduced the
cost and enhanced the quality of information.
There is a game of risk and return in every process. Since the new online
procedure of issuing securities is relatively new and is yet unseasoned, firms
must compare the risks associated and the benefits of a potential capital
appreciation. So firms must decide before using the services of online
investment banks.

CHAPTER 6: INTERNATIONAL INVESTMENT BANK
6.1 INTRODUCTION
International Investment Bank has a solid reputation in the market as it

invests across diverse asset classes across the world. Over the years it has
provided the bank's shareholders and investors with excellent returns. His
Excellency, Mr. Saeed Abduljalil Alfahim is the Chairman and Mr. Aabed
Al-Zeera is the CEO of the International Investment Bank. It has a sound
asset base of US$ 74.9million. International Investment Bank had an income
of US$ 5.03million in the first quarter of 2007. It has a capital adequacy
ratio of 37%. The outstanding performance of International Investment Bank
lies in its harmonious selection of key partners to offer attractive business
opportunities to its investors and shareholders.
International Investment Bank was in news recently for:
International Investment Bank has a solid reputation in the market as

it invests across diverse asset classes across the world. Over the years it has
provided the bank's shareholders and investors with excellent returns. His
Excellency, Mr. Saeed Abduljalil Alfahim is the Chairman and Mr. Aabed

Al-Zeera is the CEO of the International Investment Bank. It has a sound

asset base of US$ 74.9million. International Investment Bank had an income
of US$ 5.03million in the first quarter of 2007. It has a capital adequacy
ratio of 37%. The outstanding performance of International Investment Bank
lies in its harmonious selection of key partners to offer attractive business
opportunities to its investors and shareholders.
6.2 INTERNATIONAL INVESTMENT BANK WAS IN NEWS

RECENTLY FOR:
• International Investment Bank has acquired a stake in the Bahrain

based steel reinforcement bar manufacturer. UNIROL's industrial
facility is the first steel rolling mill in Bahrain
• International Investment Bank acquired a 95% stake in a high quality

portfolio of three commercial estate properties rented to Siemens
Corporation in Munich, Germany. This is the bank's fourth European
investment in total. This will give its investors an access to the
Germany's booming commercial property market.
• International Investment Bank has entered into a partnership with

Islamic Corporation for the Development of the Private Sector (ICD)
which is an affiliate of the Islamic Development Bank Group. This
partnership is accomplished for the establishment of Ewaan Capital.
Ewaan Capital is an asset management company in Saudi Arabia with
an authorized capital of 50 million Saudi Riyal. It will be directly
under supervision of the Saudi Capital Markets Authority.

• International Investment Bank announced the launch of a new US$ 65

million Abu Dhabi Property Fund 'IIB-Abu Dhabi Properties 1'. The
bank will own a 66.7% of the fund and the remaining 33.3% will be
owned by United Friends Company (UFC). The fund will invest in the
development of land located in Abu Dhabi for developing it into a
mixed-use and for building twin-towers each of 21 storeys.
• International Investment Bank started the operation of its new

Housing Development Company, Sahab Al Khaleej Real Estate Co.
• International Investment Bank is acquiring a 90% stake in the US$

105 million worth commercial real estate properties in France. It is
comprised of six commercial properties located in Paris and Lyon,
key commercial hubs of France. This acquisition aims to provide the
bank and its GCC-based investors to reap the benefits from the
prosperous commercial property market of France
• International Investment Bank has received shareholder approval to

enhance its issued and paid-up capital to US$ 100 million from the
present level of US$ 43 million. Once this feat is achievement, the
bank's total shareholder funds will increase to US$ 170 million.
International Investment Bank posted a growth of 42.3 percent in the 1st

Quarter net income. It is absolutely a rational decision to invest with the
Bahrain based bank for a person interested in long term wealth. This is so
because the bank works hard for earning dividends on the funds collected
from investors as is clear from its investment objectives.

CHAPTER 7: CONCLUSION
Investment banking is the process of raising capital for businesses through

public flotation and private placement of securities. Investment banking is
thus critical to the existence of businesses intending to grow by
employing external capital. Investment banks therefore play crucial role in
the IPOs and capital raising process. IPOs generally involve the issue of
equity securities by business for the first time and generally involve the
use of investment banks in achieving this goal. In the absence of any
model to guide businesses in choosing the capable investment banker
(Manaster and Carter, 1990), it might fail in achieving this objective.
Capabilities of investment banks, which are critical to the IPO process,
have been found to lead to the development of competitive advantages for
the investment banks. These capabilities include, competitive pricing of
services, knowledgebase developed by the investment banker, provision
of ancillary services, experience of the investment banker in its area of
business and the integrity of its stakeholders.
The Ghanaian investment banking industry exhibits low level of
competition with only 4 active out of the 14 registered investment banks
(LDMs). Most of the capabilities of an ideal investment banker are also
lacking. It is recommended that Ghanaian investment banks must improve
on these capabilities. This would lead to increased competition within the
investment banking industry and subsequently attract more firms to go
public.

BIBLIOGRAPHY
WEBSITE:
1) www.economywatch.com
2) www.banknet.com
3) www.wikipedia.com
BOOKS:
1) Managing Investment Banking
- ICFAI
2) Managing Investment Banking Organisations
- IUP

Contents

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Contents

Uploaded by

Copyright:

Available Formats

VIVEK COLLEGE OF COMMERCE

CHAPTER 1: INTRODUCTION TO INVESTMENT

An investment bank is a financial institution that assists corporations and

Investment banking is a particular form of banking which finances capital

INVESTMENT BANKING Page 1

1.2 INDUSTRY DEFINITIONS

• Investment Banking and Securities Dealing - This industry comprises

1.3 EVOLUTION OF INVESTMENT BANKING

In India, though the existence of this branch of financial services can be

INVESTMENT BANKING Page 2

1.4 GROWTH OF INVESTMENT BANKING

INVESTMENT BANKING Page 3

1.5 CONCEPT OF INVESTMENT BANKNG

The banking scenario in India is itself huge, covering the different

INVESTMENT BANKING Page 4

Investment banking is the term used to describe the business of raising

INVESTMENT BANKING Page 5

1.7 BUSINESS PORTFOLIO OF INVESTMENT BANKS

INVESTMENT BANKING Page 6

highest revenue is again from proprietary trading and investment. In general,

INVESTMENT BANKING Page 7

• In addition, the capital adequacy requirements and leveraging

INVESTMENT BANKING Page 8

1.9 MARKET STRUCTURE

Demand is driven by economic activity that results in company mergers,

INVESTMENT BANKING Page 9

Complying with mandated regulations like Basel II and incorporating

1.10 FUNCTIONS OF INVESTMENT BANKING:

Investment banks have multilateral functions to perform. Some of the most

INVESTMENT BANKING Page 10

1.11 CONFLICT INTEREST IN INVESTMENT BANKING

INVESTMENT BANKING Page 11

later. In order to stabilize their business, several merchant banks diversified

1.12 INVESTMENT BANKING VS COMMERCIAL BANKING

INVESTMENT BANKING Page 12

A commercial bank on the other hand is in business to do two main things:

INVESTMENT BANKING Page 13

CHAPTER 2: ROLE OF AN INVESTMENT BANK

The major work of investment banks includes a lot of consulting. For

There is no demarcating line between the investment banking and other

INVESTMENT BANKING Page 14

Globally investment banks handle significant fund-based business of their

Investment banks provide four primary types of services: raising capital,

An investment bank can assist a firm in raising funds to achieve a variety of

INVESTMENT BANKING Page 15

Mergers and Acquisitions

Investment banks often represent firms in mergers, acquisitions, and

Sales and Trading

General Advisory Services:

Advisory services include assignments such as strategic planning, business

2.2 NEEDS OF AN INVESTMENT BANK

INVESTMENT BANKING Page 16

2.3 CRITERIA FOR CHOOSING AN INVESTMENT BANK

INVESTMENT BANKING Page 17

It extremely important to make sure that experienced, senior members of the

Although no reputable investment bank will guarantee success, the firm

Ability to Work Quickly

Often, investment banking projects have very specific deadlines, for

INVESTMENT BANKING Page 18

Because investment banks are intermediaries, and generally not providers of

INVESTMENT BANKING Page 19

CHAPTER 3: ORGANIZATIONAL STRUCTURE OF AN

The modern investment bank is seldom organized in the form of a