ppt on investment

April 3, 2018 | Author: manbirkaurbal | Category: Investment Banking, Capital Market, Banks, Investing, Securities (Finance)



INVESTMENT MEANING OF INVESTMENT BANKING ‘Investment Banking’ as the term suggests, is concerned with the primary function of assisting the capital market in its function of capital market intermediation, i.e. the movement of financial resources from those who have them means investors, to those who need to make use of them means issuer for generating profit. DEFINITION: According to Bloomberg: “investment bank is a financial intermediary that performs a variety of services, including aiding in the sale of securities, facilitating mergers and other corporate re-organizations, acting as brokers to both the individual and the institutional clients and trading in its own account”. According to John F. Marshall & M.E Ellis “investment banking is what investment banks do”.  These firms included: Goldman Sachs.  In the 1830’s. Morgan Stanley. That trend began to change in the 1980’s as a new focus on trading propelled firms such as Salomon Brothers. hit a milestone in the 1870’s when  activities Investment a syndicate of banks from Europe and US teamed up to buy $50 million worth of US Treasury Bonds for resale to public. professional investment banks had sprung up in the US to help government raise funds for infrastructure projects and the civil war. First Boston and others.  Advising clients on mergers and acquisitions and public offerings was the main focus of major Wall Street partnerships. commercial banks started adding investment banking services to their regular banking in Banking the US. Lehman Brothers.HISTORY OF IB  By the middle of 1800’s. Merrill Lynch and Drexel Burnham Lambert into the limelight . the existence of IB can be traced to over three decades (30 yrs.ORIGIN IN INDIA Grindlays bank which has now merged with Standard Chartered bank in India started the banking operations in 1967 with the license from the RBI followed by Citibank in 1970.) .  For example : • SBI set up SBI Capital Markets Ltd. • In 1986 ICICI.   However around 1980’s most of the public sector banks were transformed into separate subsidiaries. Indian Bank any many other created separate merchant baking entities.  In India. • 22 . investment banking was largely limited to merchant banking services. •They assist public and private corporations in raising funds in the capital markets (both equity and debt).BANKING • Investment banks help companies and governments and their agencies to raise money by issuing and selling securities in the primary market. The investment bankers with their intense research guide them to invest their money in banks/FI. •The investment bankers act as an intermediary between the investors and capital market which consists of primary market and secondary market. real estate/gold etc. acquisitions and other types of financial transactions. . commodity market. •as well as in providing strategic advisory services for mergers. Proper deployment of funds will help the investors to earn good returns with safety of their initial invested funds. Capital and money market. foreign exchange market. JP Morgan. underwrite. Morgan Stanley. The investment bank then determines the value and riskiness of the business in order to price. and Citigroup. are generally recognized leaders in M&A advisory and are usually ranked . as well as reorganization. So when a company wants to issue. pricing and structuring of transactions. the company hires an investment bank. and then sell the new bonds.FUNCTIONS OF INVESTMENT BANKING •Capital and Security Underwriting Investment banks are middlemen between a company that wants to issue new securities and the buying public. new bonds to get funds to retire an older bond or to pay for an acquisition or new project. •Merger and acquisition: Banks advise buyers and sellers on business valuation. say. BofA /Merrill Lynch. Goldman Sachs. negotiation. The scope of the M&A advisory services offered by investment banks usually relates to various aspects of the acquisition and sale of companies and assets such as business valuation. as well as hedge funds use investment banks in order to trade securities. mutual funds. banks charge commission fees. . negotiation. university endowments. pricing and structuring of transactions. as well as procedure and implementation Sale equity and trading :Banks match up buyers and sellers as well as buy and sell securities out of their own account to facilitate the trading of securities Sales& Trading and Equity Research Institutional investors such as pension funds. P&l.STRUCTURE OF INVESTMENT BANKING INVESTMENT BANK FRONT OFFICE Client interaction: generates revenue & profit for the bank MIDDLE OFFICE Risk management . transaction. BACK OFFICE Operations and technology . b) sales and trading : the larger Banks will buy & sell securities on behalf of the bank & its clients . a) Investment banking is where the bank helps clients raise money in capital markets and also where the bank advises companies on mergers & acquisitions. the goal of the middle office is to ensure that the investment bank doesn’t engage in certain activities that could be detrimental to the bank’s overall health as a firm. c) Research is where banks review companies and write reports about future earnings prospects.1)Front Office : The front office generates the bank’s revenue and consists of three primary divisions: investment banking. sales & trading. and research. a)Risk management: Risk management involves analyzing the market and credit risk that an investment bank or its clients take onto their balance sheet during transactions or trades. . Research: the division reviews companies and writes reports about them with a ‘buy’ and sell rating 2) Middle office: Ultimately. Other financial professionals buy these reports from these banks and use the reports for their own investment analysis. and transacting the required transfers. It is. d)Internal corporate strategy tackling firm management and profit strategy. capital structure management. Some trades are . and liquidity risk monitoring. 3) Back office: The back office provides the support so that the front office can do the jobs needed to make money for the investment bank. created by the technology team.bank's funding. ensuring that they are not wrong. Technology has changed considerably in the last few years as more sales and trading desks are using electronic trading. b)Technology: Every major investment bank has considerable amounts of in-house software. who are also responsible for technical support. c)Financial control tracks and analyzes the capital flows of the firm. the finance division is the principal adviser to senior management on essential areas such as controlling the firm's global risk exposure and the profitability and structure of the firm's various businesses . Many banks have outsourced operations. is non-revenue regenerating yet a key functional role within investment banks. however. a critical part of the bank. a)Operations: This involves data-checking trades that have been conducted. unlike corporate strategy groups that advise clients. FDI is increased in capital market. so the investment banker services will be needed by corporate enterprise to product expert guidance. the lending policies of financial institutions are based on project orientation. the scope of investment banking will be increased. Corporate restructuring: Due to liberalization and globalization companies are facing lot of competition. they have to go for restructuring. merger. there will be great demand for investment banker services. Development of debt market: If the debt market is enhanced. acquisition or disinvestments.SCOPE OF INVESTMENT BANK IN INDIA Growth of primary market: If the primary market grows and number of issues increases. there will be tremendous scope for investment bankers. Changing policy of financial institutions: Now. In order to complete. They may . If more and more NRIs participate in capital market. So investment bankers are required to advice them for their investment in India. Entry of foreign investors: now India capital market directly taps foreign capital through euro issues. SBI Caps and IDBI Caps are two prime examples of investment banks in India today. SBI Capital Markets (SBICAPS) is an investment bank founded in August 1986. no person can act as an investment banker. there are 300 investment banks registered with SEBI. . Currently.INVESTMENT BANKING IN INDIA STATE BANK OF INDIA SBI was the first Indian public sector bank to set up its investment banking division in 1972. It is a wholly owned subsidiary of State Bank of India (SBI). without holding a certificate of registration granted by the Securities and Exchange Board of India. Currently. equity and hybrids. public issues and private placements. SBICAP has mobilized more than Rs. We offer seamless investment banking advice in buying or selling other businesses.SBI CAPITAL MARKETS Project Advisory and Structure Finance: It performs the function of collecting funds from the international and Indian financial market for the infrastructure sector including transportation. 16000 billion as funds through rights issues. PSUs. corporate. telecommunication. power. . It has successfully worked out many privatization deals with the central and state government. Merger and Acquisition Advisory: It was formed in 1990 with the aim of taking part in the privatization business. FINANCING ASSISTANCE: It is entrusted with the duty of raising funds for banks. INNOVATION: We develop innovative fund raising solutions both for domestic and international fundraising in debt. In the last five years. financial institutions and undertakings of state governments. energy and urban infrastructure. LIST OF MAJOR INDIAN INVESTMENT BANKS BASED OUT OF INDIA Avendus Bajaj capital Barclays capital ICICI securities limited IDFC IDFC private equity Industrial development bank of India . Industrial finance corporation of India Kotak Mahindra capital company SBI capital market Tata investment corporation limited . Asset Management Firms. asset management etc.Steagall Act which were allowed to carry on limited investment banking services.These firms offers only trading services to retail & institutional clients. type of instrument invested etc. structured instruments.TYPES OF PLAYERS IN INVESTMENT BANKING Full-Service Firms. Boutique Firms-These are the type of players which specialist in particular areas of investment banking.Commercial Banks operating through “Section 20” subsidiaries referring to the subsidiaries formed under section 20 of the Glass.  Commercial Banks. wealth management. purpose of investments. portfolio management depending on the type of investors. distribution. cash management. They have huge investor base which is also used by underwriters to place issues. This includes activities like fund management. M&A.  Brokerage Firms. brokerage. .These are type of investment banks who have significant presence in all areas like underwriting.These firms offer on investment services. internet. working efficiency has been increased and works are done quickly and easily.  Advance infrastructure: the country is equipped with all the latest and advances amenities such as better telecommunication.  Excessive dependence on trading sectors: investors are more dependent on the trading sector for their investments rather than any other field. project finance etc. private equity. transportation.  Technological advancement: due to technological advancement. potable water.  Proficient Employees: In investment banking all the workings are done by professionals because it requires deft and proficient personnel.SWOT ANALYSIS OF INVESTMENT BANKING STRENGTH Breadth of financial services offerings: such as trading.  WEAKNESS: Unawareness of investors: the major weakness is the unawareness of its services among investors. land etc. venture capital. joint venture.  . M&A. Decentralized management: each branch manager in a company is given the authority of taking decisions in their respective branches. The decisions made by different managers are diverse and by wrong decisions may lead to heavy . various projects in the countries and the level of sensex in the country. Removal of international trade barrier Financially attractive country: India is a financially attractive country. It can diversifying be seen by looking at the number of mergers and acquisitions. New players are foraying to the market due to this market share of each existing company is getting affected and profit as well. Brazil and India).OPPORTUNITIE Growing demand for investment banking: the knowledge of investment banking is increasing among investors and they are Stheir : investment into many sectors besides trading. Recent experience of ‘recession’ show that India is among the few countries (china. who not only survived in this difficult era but shows the path to developed countries to overcome this calamity. THREATS: Increasing Competition: competition in investment banking is increasing day by day. they have the expertise in terms of investing in the most profitable areas in different industries . • Investment banking is one of the most global industries and hence is continuously to grow with the new developments and innovations in the global financial market. • The investment banks are inventing and manufacturing new products with higher margins in hope of winning over clients. • Investment banking provides a platform for investors to build and maintain their investments as they have teams of experienced professionals who offer knowledgeable insights into the stock exchange. Additionally.CONCLUSION • Investment Banking could be termed as a relatively American phenomenon.
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