CONTENTS

1) ORIGIN OF INVESTMENT BANKING

2) INTRODUCTION TO INVESTMENT BANKING

3) SERVICES RENDERED BY INVETMENT BANK

4) RISK ASSOCIATED WITH INVESTMENT BANK

4.1) TYPES OF RISK

4.2) METHODS OF HANDLING RISK

5) TYPES OF INVESTMENT DONE BY INVESTMENT BANKS

5.1) EQUITIES
5.2) MUTUAL FUNDS
5.3) BONDS
5.4) DEPOSITS
5.5) CASH EQUIVALENTS
5.6) REAL ESTATE
5.7) GOLD
 ACKNOWLEDGEMENT LETTER

I owe a great many thanks to a great many people who helped and
Supported me during the writing of this book.

My deepest thanks to Lecturer, [MR. SAURABH SINGH] the Guide of the

project for guiding and correcting various documents of mine with attention and
care. He has taken pain to go through the project and make necessary correction as
and when needed.

I express my thanks to the director of, [DIMR, DELHI], for extending his
support.
My deep sense of gratitude to [MR. ASHOKJEPH](DIRECTOR).[DELHI
INSTITUTE OF MANAGEMENT AND RESEARCH] support and guidance.
Thanks and appreciation to the helpful people at [DELHI INSTITUTE OF
MANAGEMENT AND RESEARCH], for their support.

I would also thank my Institution and my faculty members without whom

this project would have been a distant reality. I also extend my heartfelt thanks to
my family and well wisher.
 ORIGIN OF INVESTMENT BANKING

The NYSE traces its origins to a small group of New York brokers who traded in a
handful of securities and commodities.

A historical 1792 agreement called as a Buttonwood Agreement was signed among

24 New York brokers to band the brokers into an investment group.

The name stemmed from the buttonwood tree that served as the Wall Street meeting
place for members of the group. The tree was located at 68 Wall Street.

The agreement allowed brokers to trade with each other for a commission.

In the early 1800’s, the US government regularly issued bonds to finance wars, banks
and infrastructure which were sold by merchants along with other commodities.

In Great Britain, since 1600’s, merchant banks or acceptance houses had been in
existence.

These concerns financed foreign trade and later the acceptance houses also floated
foreign issues in London and accumulated funds for long-term investment abroad.

Also important in the evolution of investment banking were private banks, many of
which were family enterprises, and finance companies.

One of the former, the House of Rothschild, attained a dominant position in the
financial centers of Europe during the 1800s and was still influential in the 1900s.

European Investment banks (excluding UK) stuck with the universal banking
concept and they remained active primarily in their local markets through the
1900’s.

In the early 1900’s, JP Morgan and Company put together another syndicate to
reorganize US Steel from an array of affiliated companies into the first billion dollar
corporation by trading shares of its smaller affiliates for the merged entity.

The Great Depression in the 1920’s and World War 2 was a bad phase for the
investment banking industry.
Investment Banks were accused of excessive speculation and the US government
stepped in to curtail the same.

The Glass-Steagall Act, passed on June 16, 1933, and officially named the Banking
Act of 1933, introduced the separation of bank types according to their business
(commercial and investment banking), and it founded the Federal Deposit Insurance
Corporation for insuring bank deposits.

In the mid-20th century, large investment banks were dominated by the dealmakers.

Advising clients on mergers and acquisitions and public offerings was the main
focus of major Wall Street partnerships.

These firms included Goldman Sachs, Morgan Stanley, Lehman Brothers, First
Boston and others.

That trend began to change in the 1980s as a new focus on trading propelled firms
such as Salomon Brothers, Merrill Lynch and Drexel Burnham Lambert into the
limelight.

Investment banks earned an increasing amount of their profits from proprietary

trading.

Advances in computing technology also enabled banks to use more sophisticated

model driven software to execute trades and generate a profit on small changes in
market conditions.

In the 1980’s, leveraged buyouts and hostile takeovers drove the investment banking
business.

Investment banks profited handsomely during the boom years of the 1990s and into
the tech boom and bubble.

IPO’s of tech companies was the key investment banking activity through the
1990’s
 INTRODUCTION TO INVESTMENT BANKING

Investment Banking‘ as 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 (the Investors), to those who need to
make use of them for generating GDP (the Issuers). Banking and financial institution
on the one hand and the capital market on the other are the two broad platforms of
institutional that investment for capital flows in economy. Therefore, it could be
inferred that investment banks are those institutions that are counterparts of banks in
the capital markets in the function of intermediation in the resource allocation.
Nevertheless, it would be unfair to conclude so, as that would confine investment
banking to very narrow sphere of its activities in the modem world of high finance.
Over the decades, backed by evolution and also fuelled by recent technologies
developments, an investment banking has transformed repeatedly to suit the needs of
the finance community and thus become one of the most vibrant and exciting segment
of financial services. Investment bankers have always enjoyed celebrity status, but at
times, they have paid the price for the price for excessive flamboyance as well.

Investment banks help companies, governments, and their agencies to raise money

by issuing and selling securities in the primary market. They assist public and private
corporations in raising funds in the capital markets (both equity and debt), as well as
in providing strategic advisory services for mergers acquisitions and other types of
financial transactions.

SERVICES RENDERD BY INVESTMENT BANKING

It Provides strategic, financial and valuation advisory services

 Use industry knowledge, expertise and contacts to advise senior executives and
boards of directors
 Identify and assess strategic opportunities
 Interpret market information and enhance shareholder value
 Provide general valuation services (e.g., segment analysis, break-up valuations,
fairness opinions)

Raise capital through the issuance of securities

 Act as intermediary between issuers and investors

 Provide access to equity and fixed income capital (e.g., investment grade, bank,
high yield, preferred stock)
  Create specialized securities and derivatives (e.g., convertibles, trust preferred
securities, warrants)

Advise companies in merger &acquisition and restructuring transactions

 Sell-side assignments (represent client in the sale of its company or some of its
assets)
 Buy-side assignments (represent potential acquirers and negotiate transactions)
 Hostile take-over defense/advisory

Offer specialized products and services that satisfy the needs of corporate and
government clients

 Private equity (e.g., Merchant Banking, Real Estate, Venture Capital, other)

 Privatization
 Monetization

RISK ASSOCIATED WITH INVESTMENT BANKING

Understanding and being able to evaluate the investment banking market and its

risks is important for all investors. Investment banking helps companies find the
capital needed to expand their business, bring new products to the market and grow
the economy. The investment banking system is important to the country’s
economic well-being and provides a tremendous value for all investors

One element of investment banking involves the proper management of risk. Risks
are always present when investing and can never be eliminated. There are
techniques that investment bankers use to manage the risks associated with
investing and to help investors and the company’s they represent maximize their
potential profits.

Types of Risk

The work of the investment banker to properly time the offer of an IPO, or
secondary offering, of a company’s stock is based on their evaluation of the market
conditions. A company’s stock is less likely to do well when investor’s
expectations are lower due to an economic hardship or concerns about inflation.
The investment banker studies the economy carefully to determine the best time to
offer a company’s stock.
Risks associated with investing and bringing a company to market includes market
risk, credit risk, inflation or purchasing power risk and regulatory risk. Each of
these risks is specific to certain types of companies and is always present. It is the
job of investment banker to understand the nature of risk and help companies and
investors mange risk properly.

Methods for Handling Risk

Risk can be managed through different strategies design to reduce exposure. An

investment banker may recommend that a stock not be sold during a certain period
when interest rates are high in order to maximize the price that the company’s
share can get. Investors use techniques such as diversification and dollar cost
averaging as a way to reduce their risk exposure.

TYPES OF INVESTMENTS DONE BY INVESTMENT BANKS

Equities

Equities are a type of security that represents the ownership in a company. Equities
are traded (bought and sold) in stock markets. Alternatively, they can be purchased
via the Initial Public Offering (IPO) route, i.e. directly from the company. Investing in
equities is a good long-term investment option as the returns on equities over a long
time horizon are generally higher than most other investment avenues. However,
along with the possibility of greater returns comes greater risk.

Mutual funds

A mutual fund allows a group of people to pool their money together and have it
professionally managed, in keeping with a predetermined investment objective. This
investment avenue is popular because of its cost-efficiency, risk-diversification,
professional management and sound regulation. You can invest as little as Rs. 1,000
per month in a mutual fund. There are various general and thematic mutual funds to
choose from and the risk and return possibilities vary accordingly.

Bonds

Bonds are fixed income instruments which are issued for the purpose of raising
capital. Both private entities, such as companies, financial institutions, and the central
or state government and other government institutions use this instrument as a means
of garnering funds. Bonds issued by the Government carry the lowest level of risk but
could deliver fair returns.

Deposits

Investing in bank or post-office deposits is a very common way of securing surplus

funds. These instruments are at the low end of the risk-return spectrum.

Cash equivalents

These are relatively safe and highly liquid investment options. Treasury bills and
money market funds are cash equivalents.

Real estate

With the ever-increasing cost of land, real estate has come up as a profitable
investment proposition.

Gold

The 'yellow metal' is a preferred investment option, particularly when markets are
volatile. Today, beyond physical gold, a number of products which derive their value
from the price of gold are available for investment. These include gold futures and
gold exchange traded funds.
 HSBC Bank

HSBC Holdings is a global financial services company headquartered

in London, Kingdom. As of 2010, it is both the world's largest banking and financial
services group and the world's 8th largest company according to a composite measure
by Forbes magazine. It has around 8,000 offices in 87 countries and territories
in Africa, Asia, Europe, North America and South America and around 100 million
customers. As of 30 June 2010 it had total assets of $2.418 trillion, of which roughly
half were in Europe, a quarter in the Americas and a quarter in Asia.

HSBC Holdings was founded in 1991 in London by The Hongkong and Shanghai
Banking Corporation to act as a new group holding company and to enable the
acquisition of UK-based Midland Bank. The origins of the bank lie in Hong
Kong and Shanghai, where branches were first opened in 1865. Today HSBC remains
the largest bank in Hong Kong, and recent expansion in mainland China, where it is
the largest international bank, has returned it to that part of its roots.

Mergers and acquisitions by HSBC

In May 1999 HSBC embarked on a major acquisition in the United States with the
purchase of Republic National Bank of New York for $10.3bn.

Expansion into Continental Europe took place in April 2000 with the acquisition

of Credit Commercial de France, a large French bank for £6.6bn.

In July 2001 HSBC bought Demirbank, an insolvent Turkish bank. 

Then in August 2002 HSBC acquired Grupo Financiero Bital, SA de CV, Mexico's
third largest retail bank for $1.1bn.

The new headquarters of HSBC Holdings at 8 Canada Square, London officially
opened in April 2003.

Then in September 2003 HSBC bought Polski Kredyt Bank SA of Poland for $7.8m.
In June 2004 HSBC expanded into China buying 19.9% of the Bank of
Communications of Shanghai.

In the United Kingdom HSBC acquired Marks & Spencer Retail Financial Services
Holdings Ltd for £763m in December 2004.

Acquisitions in 2005 included Metris Inc, a US credit card issuer for $1.6bn in
August and 70.1% of Dar Es Salaam Investment Bank of Iraq in October.

In April 2006 HSBC bought the 90 branches in Argentina of Banca Nazionale del
Lavoro for $155m.

In December 2007 HSBC acquired The Chinese Bank in Taiwan.

In May 2008 HSBC acquired IL&FS Investment, an Indian retail broking firm.

BIBLIOGRPHY:

1) HSBC.COM
2) WIKIPEDIA.COM
3) SCRIBD.COM
4) MBA KNOWLEDGE BASE.COM
5) FINWEB.COM