Investment Banking presentation
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ContentsConcept of Investment BanksImportance of Investment BankingStructure of Investment BankingFunctions of Investment BankingRole of Investment BankingInvestment Banking in IndiaTop ten Investment bankers in India
Concept of Investment BanksIn the U.S., the GlassSteagall Act, initially created in the wake of the Stock Market Crash of 1929, prohibited banks from both accepting deposits and underwriting securities, and led to segregation of investment banks from commercial banks. GlassSteagall was effectively repealed for many large financial institutions by the GrammLeachBliley Act in 1999.
In a very broad perspective, Investment Banking as the term suggests, is concerned with the primary function of assisting capital market in the movement of financial resources from those who have them (investors) to those who want them (issuers).
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.
Importance of Investment BankingHelps the corporations in raising capital. It facilitates the trading of securities thereby, increasing the liquidity of the securities.
It provides investment opportunities to the individuals or entities.
Most of the corporations get advisory services from the investment banks regarding the mergers, acquisitions and divestiture.
Structure of Investment BankingInvestment banks are organized into 3 categories.Front Office Helping customers raise funds in the capital markets and advise on mergers and acquisitionsprofessional management of various securities and other assetsBuying and selling financial products with the goal of making money on each tradeCreating and marketing financial productsResearching industries, companies, and products
Middle Office Analyzing credit and market risk for the bankMaking sure operations are complying with regulationsResponsible for capital management and risk monitoring
Back Office Making sure the bank runs smoothly by submitting trades, maintaining databases, and transacting required money transfersThe information technology department
Functions of Investment BankingMergers and Acquisitions Advisory servicesCorporate financing Equity & Debt UnderwritingEquity and fixed income researchSales and trading
Role of Investment Bank 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.
Role of Investment Bank 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.
Role of Investment Bank Investment bank is a financial institution and investment banking plays a very important role in the economy. Investment banking helps the corporations in raising capital. It facilitates the trading of securities thereby, increasing the liquidity of the securities. It provides investment opportunities to the individuals or entities. Most of the corporations get advisory services from the investment banks regarding the mergers, acquisitions and divestiture. In addition, because of the importance of the roles of investment banking, the commercial banks do not perform these roles.
Investment Banking in IndiaGrindlays bank began Investment Banking (Merchant Banking) in India in 1967 with RBI issuing the second license to Citi in 1970.
These two banks primarily provided services which included loan syndication, equity raising and other advisory services.
In 1972, a Banking Commission report asserted the need for Merchant Banking services in India by public sector banks.
The commission recommended the same structure as American investment banks (Glass-Steagall Act).
Merchant banks were meant to manage investments and provide advisory services.
Investment Banking in IndiaSBI was the first Indian public sector bank to set up its merchant banking division in 1972.
This was followed by Bank of India, Central Bank of India, Bank of Baroda and many more.
SBI Caps and IDBI Caps are two prime examples of merchant banks in India today.
Currently, there are 136 merchant banks registered with SEBI.
Lastly, without holding a certificate of registration granted by the Securities and Exchange Board of India, no person can act as a merchant banker.
Top 10 Investment Bankers in IndiaVendus CapitalBajaj CapitalCholamandalam Investment & Finance CompanyICICI Securities LtdIDFCKotak Mahindra Capital CompanySBI Capital MarketsTATA Investment Corporation LtdYes BankUTI Securities Ltd
Global Investment BankersBank of America (Bank of America Merrill Lynch)Barclays (Barclays Capital)BNP Paribas (BNP Paribas CIB)Citigroup (Citi Institutional Clients Group)Credit SuisseDeutsche BankGoldman SachsHSBCJPMorgan Chase (J.P. Morgan Investment Bank)Morgan StanleyNomura HoldingsUBS (UBS Investment Bank)Royal Bank of Canada (RBC Capital Markets)Royal Bank of ScotlandWells Fargo (Wells Fargo Securities)