You are on page 1of 27

Seminar Report on

INVESTMENT BANKING
Submitted by
Akshatha upadhyay – 1MS11MBA03

Under the coordination of Mr. Santhosh Kumar.S Assistant Professor, MSRIT
1

Under the guidance of Mahalakshmi .A Assistant Professor, MSRIT

Table of content
Sl.no 1. 2. 3. 4. Topic Introduction Literature review History of investment bank Regulation of investment bank in USA and India Functions of investment bank Structure of investment bank Current scenario of investment bank in the world and India. Page no 3 to 5 6 7 to 9 10 to 11

5. 6. 7.

12 to 14 16 to 18 19 to 22

2

3 .Introduction An individual or institution which acts as an underwriter or agent for corporations and municipalities issuing securities. and • offer advisory services to investors. • maintain markets for previously issued securities. • private equity placements and • corporate restructuring. investment banks also have a large role in • facilitating mergers and acquisitions. Most also • maintain broker/dealer operations.

investment banks do not accept deposits from and provide loans to individuals . From 1933 (Glass–Steagall Act) until 1999 (Gramm– Leach–Bliley Act). 4 .Unlike traditional banks. In recent years. have historically not maintained such a separation. Other industrialized countries. including G8 countries. the United States maintained a separation between investment banking and commercial banks. some investment banking firms have diversified or merged with other financial firms to become full service financial firms.

no 1 2 Name of the Author / source H R Machiraju Internet Title of article Indian financial system Investment Banking at 50.Literature review Sl .com The Rise Of The Modern Investment Bank What do investment bank do ? 3 News article by Laurence Knight Business reporter.000 Feet summary fourth edition textbook structure of investment bank by John Spacey Financial theory Investopedia. BBC News video and activates of Goldman Sachs 4 Goldman Sachs webpage what do we do 5 .

including aiding in sales of securities.’ Bloomberg provides a more consolidated definition for an investment bank. ‘ a bank which deals with the underwriting of new issues and advices Corporations on their financial affairs. 'A financial Intermediary that perform a verity of service.’ 6 .organizations.Definition of Investment banking The dictionary of banking and finance defines investment bank as a term used in US To mean. Facilitating mergers and other corporate re. acting as broker to both The individual and the institutional client and trading in its own accounts.

professional investment banks had sprung up in the US to help government raise funds for infrastructure projects and the civil war. • By the middle of 1800’s. 7 .History of investment banking • A historical 1792 agreement called as a Buttonwood Agreement was signed among 24 New York brokers to band the brokers into an investment group. • Investment Banking hit a milestone in the 1870’s when a syndicate of banks from Europe and US teamed up to buy $50 million worth of US Treasury Bonds for resale to public. •In the 1830’s. commercial banks started adding investment banking services to their regular banking activities in the US.

Morgan Stanley. large investment banks were dominated by the deal makers. and officially named the Banking Act of 1933. and it founded the Federal Deposit Insurance Corporation for insuring bank deposits. 1933. Lehman Brothers. Advising clients on mergers and acquisitions and public offerings was the main focus of major Wall Street partnerships. These firms included Goldman Sachs. introduced the separation of bank types according to their business(commercial and investment banking). 8 . First Boston and others. • In the mid-20th century.• The Glass-Steagall Act. passed on June 16.

Investment Banking in India • Grindlays bank began Investment Banking (Merchant Banking) in India in 1967 with RBI issuing the second license to Citi in 1970. • SBI was the first Indian public sector bank to set up its merchant banking division in 1972. a Banking Commission report asserted the need for Merchant Banking ser ices in India by public sector banks they recommended the same structure as American investment banks (Glass-SteagallAct) 9 . In 1972.

The Securities Exchange Commission (SEC) exercises advisory and regulatory role of Bankers . 10 . 1940.Regulation of investment bank in USA 1. 2. The powers of SEC was further strengthened in 1960 by authorizing it to inspect the records and Accounts of firms engaged in the business. 1940 which sought to regulate them. 3. The investment and portfolio activities became subject to SEC supervision. Investment trusts were covered by the investment company act. Investment advisors are required to be registered under the investment advisor Act.

they are also regulated by SEBI Apart from the above specific regulations relating to investment banking.Regulation of investment bank in India Pure investment banks which do not have presence in the lending or banking business are governed primarily by the capital market regulator (SEBI). 11 . However. Universal banks and NBFC (non banking financial companies) investment banks are regulated primarily by the RBI in their core business of banking or lending and so far as the investment banking segment is concerned. investment banks are also governed by other laws applicable to all other businesses such as – tax law. property law. contract law. local state laws. arbitration law and the other general laws that are applicable in India.

public finance. and high-grade debt and generally work and collaborate with industry groups on the more intricate and specialized needs of a client. asset finance and leasing. 12 . equity. and maintain relationships with corporations within the industry to bring in business for a bank. Product coverage groups focus on financial products. •Industry coverage and •Product coverage groups. industrials. or technology. structured finance. such as healthcare.Functions of Investment Banking The investment banking division (IBD) is generally divided into. such as mergers and acquisitions. restructuring. leveraged finance. Industry coverage groups focus on a specific industry.

exchange offers. Some of the most important functions of investment banking are as follows: • Investment banking helps public and private corporations in issuance of securities in the primary market. and consents. 13 . The Liability Management team advises on and executes public and private debt transactions including tenders.Investment banks carry out multilateral functions. • Investment banking provides financial advice to investors and helps them by assisting in purchasing and trading securities as well as managing financial assets • Liability management. They also act as intermediaries in trading for clients.

• Mergers and acquisitions advice Example of Goldman Sachs.ON. 14 . they helps clients securitize assets. business to PPL ($8bn).S. 2011 E. on its planned acquisition of Synthesis ($20. businesses and risks associated with acquisition financing and balance sheet management. on the sale of its U.• Structured Finance. 2010 • Underwriting The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt).8bn). Johnson & Johnson.

providing technical analysis or program trading as well as advising for mergers and acquisitions 15 .•SPIN-OFFS AND RESTRUCTURINGS Example. 2010 Small firms which provide services of investment banking are called boutiques. on the spin-off of its capital goods activities into Fiat Industrial ($18bn). on its split into two companies and the spin-off of Motorola Mobility ($10bn). They mainly specialize in bond trading. Fiat. 2011 Motorola.

Structure of investment bank 16 .

17 .

18 .

19 .

Lehman Brothers and Merrill Lynch have been destroyed in the subprime crisis. Credit Suisse are the major players in the global investment banking industry 20 .Current Scenario Two collapses of the stock market . UBS. Goldman Sachs. But still. Landmark companies including Bear Stearns.the tech bubble and the sub-prime crisis have taken their toll on the investment banking industry. investment banking remains a key element of our capital markets. Goldman Sachs and Morgan Stanley have moved from pure play investment banks to become commercial banks after the repealing of the Glass-Steagall Act.

Leading investment banks in the world 21 .

Banks with international presences and to benefit.Investment bank scenario in India Investment banking will grow over ten-fold: Investment banking will be among the fastest growing segments in the banking industry rising from 4 percent to 7 percent of the entire corporate banking revenue pool. 22 . larger corporate customers expect to demand higher support for i nternational expansion and mergers and acquisitions over next decade The revenue pool will shift from traditional corporate banking to investment banking and advisory.

Leading investment bank in India 23 .

Future scope for investment banks After the world faced a major economic recession in the second half of 2008. The future of investment banking might comprise the following: •More Stringent Laws and Restrictions •Emphasis on Equity Derivatives and Currency trading •Fewer big banks and more small boutiques •Lesser Dependence on Short-Term Funding 24 . the positive aspects and financial strength of investment banks cannot be neglected. However. as the market has its own share of ups and downs. many scholars and think tanks were skeptical about the restoration of the economy.

• The sub-prime crisis of 2008 has been a hammer blow for pure play investment banks. • Indian Investment Banking industry has still a long way to go before it catches up with its global peers.Conclusion • Investment Banking could be termed as a relatively American phenomenon. 25 .

26 . mergers and acquisition.Learning experience The various functions carried out by investment banks. etc. Difference between commercial bank and investment bank. Various investment banks in India and the top notch bank among them. The scope for career in investment bank and the various functions that can be carried out. Which includes advisory service .

27 .