Agenda of the day
Introduction to Investment Banking.
Concepts and definitions.
Business portfolio of investment banks
Service portfolio of investment banks in India.
An investment bank is a financial institution that assists individuals,
corporations, and governments in
raising capital by underwriting or acting as the client's agent in the
issuance of securities (or both). An investment bank may also assist
companies involved in mergers and acquisitions and provide
ancillary services such as market making, trading
of derivatives and equity securities, and FICC services (fixed
income instruments, currencies, and commodities).
Unlike commercial banks and retail banks, investment banks do
not take deposits. From 1933 (Glass–Steagall Act) until 1999
(Gramm–Leach–Bliley Act), the United States maintained a
separation between investment banking and commercial banks.
Other industrialized countries, including G8 countries, have
historically not maintained such a separation.
There are two main lines of business in investment
1.Sell Side:-Trading securities for cash or for other
securities (e.g. facilitating transactions, marketmaking), or the promotion of securities (e.g.
underwriting, research, etc.) is the "sell side",
2.Buy Side :- It is a term used to refer to advising
institutions concerned with buying investment
services. Private equity funds, mutual funds, life
insurance companies, unit trusts, and hedge
funds are the most common types of buy side
Core activities of Investment
Banking:Front office:1. products,
2.Sales and trading ,
Middle office:1.Risk Management
3.Compliance and Financial control.
Importance of Investment Banking
1.Corporations- raising its capital. It facilitates the
trading of securities thereby, increasing the liquidity of
2. For Individuals- It provides investment opportunities
to the individuals or entities.
3.Most of the corporations get advisory services from
the investment banks regarding the mergers,
acquisitions and divestiture.
Who are the Clients…?
1.Investment banking clients can vary from
sophisticated clients. i.e. major corporations or large,
experienced funds to smaller institutions like SME’s
usually depending on the size of the banks
2.Some of the smaller Investment banks have focuses
on either certain sectors i.e. healthcare or technology
or stage related companies i.e. start ups can raise
money from investment vehicles .They also provide
advice for M&A deals and real estate deals, assess a
Problems Of Investment Banking in India
1.Diversification Towards Capitals Markets.
2. No Proper System Of Investment Banking In
3.Lack Of Institutional Financing
4. Lack Of Depth In The Secondary Markets,
especially In the Corporate Debt Segment.
Equity Portfolio – Stand by
underwriting, private placements,
securities business(broking marketing,
distribution and research).
Debt Portfolio – Fixed income
underwriting and placements,
structured financing, securitisation,
high yield bonds, CDOs and debt
M&A Portfolio – Corporate
restructuring, M&A transaction
services, merchant banking,
corporate finance advisory.
Equity Portfolio – Underwriting,
bought deals, secondary
market and proprietary trading,
equity derivatives and arbitrage
Debt Portfolio – Underwriting,
secondary market making,
proprietary trading, debt
derivatives and structured
M&A Portfolio – Participation as
lead or co-investor in buyouts,
Core Investment Banking
Public offers in equities and bondsdomestic offers, foreign listing on
domestic markets such as Wall
Street, sponsored ADR/GDR
programs, underwriting, sales and
Private Placements- bonds and
equity institutional placements,
global bond underwriting and
M&A transactions advisory, tender
offers, M&A financing, co-investing,
buy-outs and LBOs, high yield M&A
Asset Management- mutual funds,
hedge funds, private equity and
venture capital, buyout funds
Securities business- stock broking,
investment advisory, proprietary
trading and investments, derivatives,
Forex and commodity products
Risk advisory and management
Other capital market services.
Core Investment Banking and Allied Business Portfolio
Investment banking metamorphosed from a pure intermediation and
service activity of the early era in to a global fund and non-fund business
in securities and capital markets.
Contemporary global investment banks handle significant fund-based
business of their own in the capital market along with their non-fund
However, these distinct segments are handled either on the same
balance sheet or through a conglomerate structure using subsidiaries
and affiliates depending upon the regulatory requirements in the
operating environment of each country.
The requirement of a strong and huge balance sheet has become very
important in contemporary investment banking to bag prestigious and
big-ticket mandates so as to be on the top of the league tables.
The banks with big balance sheet s such as Goldman Sachs ($923 billion
in 2011, Morgan Stanley ($750 billion in 2011) and universal banks such as
JP Morgan, Citigroup, and Bank of America Merrill Lynch , provide an
idea of how big the investment banking business has grown in terms of a
capital driven industry, much like commercial banking.
Investment banking is completely American
phenomenon and it has long way to go in