Investment banking

Investment bank is a financial intermediary that provide services in the following areas:

 Raising capital by underwriting

 Acting as the agent in the issuance of the
securitites
 faciliating mergers and other corporate
reprganizations
 Acting as a broker for instituational clients

Ancillary Services :

 Trading of Derivatives
 Fixed Income
 Commodity Securitites

Charactertics of investment banking Industry :

 IB is primarily Focused on advisory based services

 Most of their income is fee based
 They are key movers of capital across the globe

Diffrence between investment bank & Commercial bank

 Commercial bank
They Accept deposits from customers for checking accounts and savings accounts.
Commercial banks make most of their earnings from their Net Interest Income
 Investment Bank

Investment Banks are simply intermediaries. They do not accept deposits. Investment
Banks earn income through fees charged for various services rendered by them .
Examples
A Company XYZ WANTS TO RAISE $ 200 mn as capital
The Company may obtain a loan from the commercial banks for the entire $ 200 mn and pay
interest on that
or, It may sell bonds publicly taking help of an investment bank like deutsche bank

What is Universal Bank ?

A universal bank is a financial service conglomerate combining retail,
wholesale and investment banking service under one roof
 What is Merchant Bank ?

A Merchant bank is a company that deals mostly in international finance, business loans for compan
These banks are experts in international trade, which makes them specialists in dealing with multination
Merchant banks focus on providing sollutions and financial products to midsized and large private and pu
Merchant bankers not only handle corporate deposits and treasury services but also commercials lendin
finance. Investment Banking services are typically also offered by merchant banks to allow their clients a

Examples of pure investment Banks

RothChild
Lazard
European Risk capital
Wells Fargo
TD Securitites

Examples of investment banks

BNP PARIBAS
Societe Generale
Deutsche bank
HSBC
JP MORGAN
Citigroup

Structure of Investment Banking

Front office
Miiddle Office
Bank Office

Investment banking - Activities

 Front Office
Advisory Services
Sales & Trading
Global Transaction Service

 Middle Office
Risk Management
Corporate Treasury
 Financial Control
Compliance

 Back Office

Operations

 Advisory Service

Strategic Planning
Business Valuations
Financial Restructurings
Opinion on Fairness of a proposed transaction

 Role of Investment banking

Sales & Trading :-

Making a market in stock

Placing of new offerings
Publishing Research Reports

Mergers & Acquistions :-

Mergers
Acquisitions
Divestitures

Raising of Capital:-

To acquire another Company

Reduce Debt load
Expand existing operations
Specific Project Financing

Business portfolio of investment banking

 Core Business Portfolio

Management of Public offers of equity & debt

Open Offers
Buy back oofers
Delisting offers
Project Financing
Debt Syndication
 Structured Finance
Private Equity Syndication
Preferential Issue
Financial Restructuring
Corporate Re- Organization ( mergers , Asset Sales )
Acquistions
underwriting
Market Making
Bought out Deals
Investments in primary markets

 Support Activity Portfolio

Stock Broking
Derivatives Products
Portflio management
sales & Distribution
Equity Research and investment advisory
Corporate Research
Venture capital
Private Equity
Asset management
Proprietory trading
Dealing in securities

UNDERWRITING

It is an agreement entered into by a company with a financial agency in

order to enusre that the public will subscribe for the entire issue of shares
and debentures made by the company
 
The Financial agency is known as the underwriter
 
An underwriter agrees to buy that part of the company issues which are not
subscribed to by the public in consideration of a specified underwiriting
commision

--Types of underwriting
* Fixed Price offer
The investment banker decides a price based on market appetite and opens the offer at a
predetermined price
 Book Built offer
Generating, Capturing and recording investor demand during an IPO
 
Efficient Price discovery mechanism
 
Issuer,Book Runner ( i.e Lead Underwriter) and other underwriters are privy to the book buit
 
Bid Prices may a floor or a CAP