Investment Banking

1. Investment Banking

2. Activities of Investment banks

3. Careers in Investment Bank

4. How to prepare for a Career in Investment Banking

5. Best Investment Banks

6. Principal businesses of investment banks

7. Investment banking divisions

8. Investment Banker’s Template

9. Merchant banker

10. Glass Steagall act

 Investment Banking
 Money makes the world go 'round.

 Investment banking is concerned with primary function of assisting capital

market in its function of capital intermediation i.e. the movement of financial
resources from those who have them (investors) to   those  who need to make
use  of them for generating profit (the issuer/companies)

It performs a variety of services Including:

• Aiding in sale of securities.
• Facilitating mergers and other corporate reorganizations.
• Acting as a broker to both individual and institutional clients.
• Trading for its own account.

 It is a division of financial corporations that deal with the creation of new debt
and security instruments, underwriting IPO processes, merge or acquire
companies and help high net worth individuals and banks to facilitate high-value
investments.
 Activities of Investment banks

 Transfer of economic resources through time, across borders and among

industries.

 Risk management.

 Clearing and settlement of payments to facilitate trade.

 Resource pooling and subdividing of ownership in enterprises.

 Providing reliable price information on securities to help decentralized decision-

making in securities market.

 Mitigating the impact of asymmetric information on interactions among parties

i.e. overcoming the problem of hidden information (Adverse selection) and
hidden- action (Moral hazard).
Contd…
Careers in Investment Bank
 How to prepare for a Career in Investment Banking

 Understand the industry, the positions, and the lifestyle

• This is a wonderful but crazy industry.
• Are you suited for the lifestyle—very long hours?

 Start building your contacts.

 Meet with as many of the visiting speakers as possible.

 Do well in your classes.

• A strong concept is important.
• Have a good financial analysis project to leave with potential employers as an
example of your best work.
Best Investment Banks
 Principal businesses of investment banks

1.Investment banking business

2.Trading business

3.Asset Management Business

 1.Investment banking business

 Arrange financing for cooperation and governments through (Capital market

group):

•  Debt
•  Equity
•  Convertibles

 
 Merger and Acquisition products

Advise on merger and acquisition transactions:

 2.Trading business

 Client trading:
• Sells and buys securities and other financial assets as an intermediary on behalf
of investing clients

Operates in 2 business units

1.  Equity and
2.  Fixed income, currency and commodities

•  Research is provided to investing clients.

  Proprietary trading and principal investing:

• Investment activities by the firm that affects the firm's accounts but do not
involve investing clients.
• Focused on investment in equity (public and private), bonds, convertibles and
derivatives.
 3. Asset Management Business
 Offers equity, fixed income, alternative investments and money market
investment products and services to individual and institutional clients.

 For alternative investment products the firm co-invests with clients in hedge
funds, private equity and real estate funds.
Investment banking divisions
Investment Banker’s Template
 Merchant banker

 As per SEBI (Merchant Bankers) Rules, 1992, A merchant banker is defined as any
person who is engaged in the business of issue management either by making
arrangements regarding selling, buying or subscribing to security or acting as a
manager, consultant advisor or rendering corporate advisory service in relation to
such issue management.

 Merchant banker leading to a public offer is called the lead manager.

 Glass Steagall act

 Historically, through 1999, US banks with deposit taking businesses

( commercial/retail) were barred from operating investment banking business.

 This rule was created by Glass Steagall act of 1933 which was enacted after the
stock market crash of 1929 to protect depositors asset.

 In 1999, the Graham-Leach-Bliley act overturned the requirement to keep

investment banks and commercial banks separate and led to formulation of US-
headquartered Universal investment banks including JP Morgan citigroup and
Bank of America