Acknowledgement

I am immensely grateful to all sort of people who

have provided me with their invaluable guidance
and unwavering support throughout the duration of
this project. Their expertise and mentor-ship have
been instrumental in shaping the project’s direction
and ensuring its successful completion. Their
contributions and collective effort have greatly
enriched the outcome.
Additionally, I would like to express my gratitude
to the university and faculty for providing us with
the necessary resources and opportunities to
undertake this project. Their encouragement and
belief in our abilities have been a constant source
of motivation. Finally, I am indebted to my parents
for their continuous support and encouragement.
Their unwavering faith in me and their willingness
to lend a helping hand whenever needed have been
crucial throughout this journey.
 Objective and scope
 Objective
1. The objective of this project is to understand
about investment banks in the economy.
2. It aims to understand the functions of investment
banking.
3. It has an objective of finding about the new
trends and challenges in this sector.
4. It also aims to examine the various aspects of
investment banking.

 Scope
The scope of this project is to go through a detailed
analysis of various function of investment banking
as well as to see the same with the help of few case
studies and examples.
It also talks about the emerging trends in this sector
as well as about the impact they will have in the
future.
The challenges of this are also discussed.
Conclusions are also drawn to provide a better
understanding of investment banking and its
importance in the global economy.
 Introduction to Investment Banking
 Defination
Investment banking is a unique branch of banking
that assists people or organizations in raising funds
and offers them financial consulting services.
They serve as a middleman between security
issuers and investors and aid startup companies in
going public. They can sell shares on behalf of the
issuer and receive commission for each share sold,
or they can buy all the shares that are available at a
price determined by their experts and resell them to
the public.

Overview
Investment banking includes a variety of services such as
offering financial consulting services, managing assets,
and underwriting, selling, and trading securities are just a
few of the many activities that make up investment
banking. Investment banks assist a wide range of
stakeholders, including businesses, governments, non-
profit organizations, and private individuals, in raising
money on the capital market.They provide their clients
with the following key services:

1. Provide advise on mergers,

2. acquisitions, and other financial transactions; conduct
research and generate opinions on securities, markets,
and economies; issue, buy, sell, and trade stocks and
bonds;
3. operate as trading intermediaries for clients; lend and
invest banks' assets; issue, buy, sell, and trade
securities; and manage investment portfolios.

Investment banks used to stand in stark contrast to

commercial banks, where customers primarily deposited
money and applied for business and consumer loans. The
two types of arrangements have converged more
recently, as commercial banks try to corner the market by
positioning themselves as one-stop shops by providing
more investment banking services.Despite the fact that
these three businesses are frequently confused,
brokerages, broker-dealers, and investment banks are all
distinct from one another. When helping with the
purchase and selling of stocks, bonds, and mutual funds,
a brokerage business receives a commission. Similar
tasks are carried out by a broker-dealer, but it also trades
for its own account. An investment bank is essentially a
broker-dealer that offers financial services to businesses
such advising on mergers and acquisitions, aid with
initial public offerings, and strategic planning.

What is Investment Banking?

 A person or organization sometimes acts as an

underwriter or mediator for corporations or
municipalities issuing securities.
 Most of them often preserve broker-dealer operations
to maintain markets for formally issued securities and
suggest advisory services to investors.
 Investment banking also has a large role in facilitating
mergers and acquisition, private equity placement and
corporate restructuring.
How does Investment Banking Works?
There are two types of investment banks:

 Sell-side
 Buy-side
The sell-side sells shares in newly issued IPOs, provides market-
making services, places new bond issues, and assists customers
with transactions.

The buy-side, on the other hand, trades securities such as bonds

and stocks in order to maximize returns. It collaborates with
mutual funds, pension funds, and hedge funds.

Example:-
Assume a business XYZ acquires a competitor ABC. However,
XYZ is unable to establish the true value of ABC. XYZ is also
interested in the acquisition's long-term prospects.

This is where investment bankers come into play. XYZ seeks

the services of an investment bank not just for advice but also to
conduct the full transaction. Beginning with an examination of
ABC, we arrive at valuation, competitive analysis, and future
growth.

Following that, the investment bank will handle the entire

process. Furthermore, it will contribute to the completion of this
transaction by assisting XYZ with the necessary documentation.
It will also advise a suitable time for the transaction to take
place.

It should also be noted that in this case, the investment bank is

working on the buy-side. Other investment banks will be
involved on the sell-side in the same transaction.
The higher the commission for investment banks, the larger the
deal size.

Investment banks play an important role in assisting various

organizations in obtaining capital funding and making sound
financial decisions. They also analyze the financials of the
companies to assist their clients in making future judgments.

They write a statement on a company's plans to use funds based

on this information. An investment bank bridges the traditional
divide between investors and large enterprises.
 Investment bank segmentation
An investment bank can be further subdivided based on the
services provided:

 Back Office
 Front Office
 Middle Office
 Back-office Services
1. Ensure the software and other trading platforms are
operational.
2. Making certain that the appropriate securities are sold,
acquired, or settled for a sufficient amount.
3. Making new trading algorithms.
 Front Office Services
1. Assisting businesses with mergers and acquisitions.
2. Investment management for high-net-worth people and
institutions.
3. Strategy formulation.
4. Research and analysis of the capital markets.
5. Finance for corporations.
 Middle Office Services
1. Maintaining capital flow.
2. Compliance with government regulations and constraints.
Functions of Investment Banking
 IPOs

The primary function of investment banking is to conduct IPOs

(Initial Public Offerings).In this role, investment banks create
various portfolios of all securities and then sell them to the
public. In exchange, an investment bank assists a company in
setting everything up and listing an IPO. One of the most
important investment banking functions is the initial public
offering (IPO). This bank, in turn, charges a commission.
 Merger and Acquisitions

When acquiring or merging with another organization, the

owner does not know the actual worth of that firm, as well as
the future benefit of that firm, so Investment Banking assists
them in determining this. A firm valuation is a key role in M&A.
The bank determines a company's true worth.An investment
bank develops a plan for the merger and acquisition of two
companies. The investment bank also handles financial
provisioning for a firm, which is necessary for M&A
transactions. It aids a company's growth.

 Merchant Banking

All investors want counseling and advisory services before

investing funds in any area, thus the investment also serves as a
merchant to all investors.It offers clients a variety of services
like as portfolio management and client financing.Broker on the
stock exchange, help to the government sector, managing a
company's public offering, and dealing with small businesses
and enterprises.
 Challenges

1. Increasing reporting complexity and responding to new and

evolving regulations while focusing on data
optimization.The changing requirements for reporting
compliance, including governance, as defined in BCBS 239
and Pillar 3, provide significant problems for all banks. This
puts further strain on data optimization by increasing the
accuracy, timeliness, and granularity of risk and financial
reporting requirements.
2. Cybersecurity: The number of occurrences of digital theft
from banks via Swift risk controls bypassed. Swift processes
$6 trillion in transfers every day with 11 000 members. The
EBA will stress test financial institutions to determine their
vulnerability to hackers, and Swift will introduce "two
factor" authentication.

3. A scarcity of capital resources: The global economy is

currently experiencing severe recessions and financial
depressions as a result of the Covid-19 global pandemic,
which has had a negative impact on the economy. As a
result, most individuals and businesses are uninterested in
investing their money. Rather, they choose to keep their
money for a while rather than investing it in the near term.
This results in a paucity of capital resources for the
investment banking sector to efficiently allocate to its
customers, resulting in less business possibilities for
investment bankers.

4. Keeping New Employees: Even when firms promise

substantial salary and rapid job advancement, young
professionals are considerably more drawn to other areas
such as technology or startups. The investment banking
business is implementing new policy measures, such as
rapid promotion, to attract new employees, but today's
youth prefers to work in a flexible industry with a good
work-life balance. The investment banker must work longer
shifts and meet strict deadlines. As a result, attracting and
maintaining bright individuals has become a major difficulty
for this business. However, banks are devising new
strategies for attracting and maintaining skilled employees.