Investment Banks 3

8/9/2019 Investment Banks 3

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Investment Banks

By Marium Irfanullah


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A financial intermediary that performs

a variety of services. This includes:

Underwriting Acting as an intermediary

between an issuer of securities

and the investing public,

Facilitating mergers and

acquisitions,

also Acting as a broker for

institutional clients.

What are Investment

Banks?


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Glass-Steagall Act 1933 (the Bank Act of 1933)

assed in the reaction to collapse of U! banking system

one of its intention was to create a wall between commercial banking andinvestment banking

and also differentiate between investment banks and brokerage services.

This act was repealed in "###

Gramm Leach Bliley Act in Nov 1999

$emoved barriers between banking insurance and securities.

Financial crisis of !!"

%ed to a prolonged economic recession

How did Investments banks

begin ?


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What does an Investment BankOer?


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&nvestment banking is split into :

Front office

'iddle office

(ack office

Investment Bank Structure


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#nvestment $anagement%

The professional management of various securities and other assets, to

meet specified investment goals for the benefit of the investors.

&nvestors may be institutions or private investors.

Sales an& tra&ing%

&t is the most profitable area of an investment bank which is responsible

for the ma)ority of revenue of most investment banks.

'esearch%

&t is the division which reviews companies and writes reports about their

prospects, often with *buy* or *sell* ratings. +hile the research division

generates no revenue, its resources are used to assist traders in trading,

the sales force in suggesting ideas to customers, and investment

bankers by covering their clients

ront o!ce


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Finance

'

Legal an& cororate *reas+ry

'isk management%

&t involves analying the market and credit risk that traders are taking onto the

balance sheet in conducting their daily trades, and setting limits on the

amount of capital that they are able to trade in order to prevent -bad- tradeshaving a detrimental effect to a desk overall.

Middle O!ce


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,erations%

&t involves datachecking trades that have been conducted, ensuring

that they are not mistaken, and transacting the required transfers.

+hile it provides the greatest )ob security of the divisions within an

investment bank, it is a critical part of the bank that involves

managing the financial information of the bank and ensures efficient

capital markets through the financial reporting function. The staff in

these areas are often highly qualified and need to understand in

depth the deals and transactions that occur across all the divisions ofthe bank.

Back O!ce


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*echnology%/very ma)or investment bank has considerable amounts of inhouse

software, created by the Technology team. Technology has changed

considerably in the last few years as more sales and trading desks

are using electronic trading platforms.

Back O!ce "#ontinued$


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#nvestigation:

A company that desires to raise money will approach an

investment banking firm for its assistance. From that point on,that investment banking firm is known as the manageror lead

investment bankin the process. The manager will provide two

investigations, or type of analyses, for its client:

%egal Analysis 'arket Analysis

unctions Of Investment

Banks


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Legal Analysis

0reate the bond or stock agreement and submit it to the !/0 for its approval.

The !/0 will ensure that all relevant financial details are being disclosed toprospective investors

$arket Analysis

The investment banker will then determine the fair price to be placed on the

securities.

&n the case of bonds, the investment banker will recommend an interest ratethat must be paid in order to achieve an acceptable tradeoff

&n the case of common stock, the investment banker will recommend the

ma1imum price that will allow the shares to sell relatively quickly.

%egal &nalysis ' Market &nalysis


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n&er.riting%

To underwrite something means *to assume the risk of

loss*. Underwriting is the process by which investment banks

raise investment capital from investors on behalf of

corporations and governments that are issuing securities.


Banks


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Selling:

/ach of the investment banks will likely have its own sales force.

2owever, additional brokerage firms may be invited to help sell the

issue in return for a commission on the sale. These firms may easily

number in the doens for a large issue. 0ollectively, these

brokerage firms are known as the selling group.


Banks


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&nvestment bank and firm agree on type and price of security

Firm prepare prospectus with the help if &nvestment banks

rospectus is distributed to brokerage house network for pre

issue sales.

!/0 approved Finalied prospectus is distributed

!ecurities are bought by &nvestment banks and issued to public

(rocess of )nderwriting


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#urrent *conomic#onditions *ecting

Investment Banks The political uncertainty is the main contributor for this

downfall as government plays a vital role in any economy

by acting as the agents and catalyst and devisingeconomic plans.

akistan3s foreign e1change reserves dropped to 4"5.565

billion

ak $upee has declined to lowest ever this year crossingthe hundred mark depreciating more than 768 since

5669.


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+he trade de,cit fell by -./ for the ,rst

eight months of this ,scal year0

1 ending 2.-2 was the ,fth consecutiveyear with an annual growth below 3 /0

#(I in4ation has gone down from 25/ to 6/0

7omestic 8ublic debt reached the level of3./ of 97( and 8rivate sector loans havereduced to -:/0

;atio of 97( has gone down to 2


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To make things worse, budget deficit has reached

unsustainable levels. The government has pursued anew bailout from the &'F but due to general elections

there is an uncertainty how the winning party will

implement ta1 reforms and impose spending cuts.


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+he country at this moment needs huge

investments0

+he government along with central bankshould initiate to 8um8 in direct moneyto accelerate the circulation cycle0

Start large scale 8ro>ects to encourage

investments0

What the government should

do?


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%ist of Investment Banks in

(akistan-0 &l+owfeek Investment

Bank %imited

20 Invest #a8ital

Investment Bank %imited=0 &tlas Investment Bank

%imited

30 #rescent InvestmentBank %imited

50 *scorts Investment Bank

%imited:0 irst #redit andInvestment Bank %imited

60 I9I Investment Bank%imited

60 idelity InvestmentBank %imited


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%ist of International Investmentbanks

-0 9oldman Sachs

20 Morgan Stanley

=0 D(Morgan #hase

30 Bank of &mericaMerrill %ynch

50 7eutsche Bank

:0 #itigrou8

60 #redit Suisse

Investment Banks 3

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