Flashcards in Investment Banking - Intro Deck (44):
4 main areas of investment banking
a) Capital Market b) Advisory c) Trading & Brokerage d) Asset Management
What are the Critical Factors in investment banking
a) Government Regulations & Market Dynamics
Name the largest investment banks in the world
Barclays, Morgan Stanley, Goldman Sachs, Merrill Lynch, JP Morgan, Credit Suisse, CITI, Deutsche Bank
What's the main activity of investment bank
Security Underwriting. Investment banks bought bonds and stocks from the issuers and resold these securities to a group of investors
How investment banks have emerged in America?
American economy was growing too fast, commercial banks couldn't cope with the pace to expand railroads, mining & other heavy industries
What are the main activities of a commercial bank
Deposit taking & Credit giving activities
What's a spread
the difference between the interest that the bank pays to a depositor and the interest that it pays to the borrower. Spread = Interest Income - Interest Expense
What's commerical banks main source of revenue
What's a universal bank
banks that perform commercial and investment banking services
What's Glass-Steagall act and which year it was enacted
Glass-Steagall act prohibited commercial banks involvement in investment banking activities and it was enacted in 1933.
Three main business units of Morgan Stanley
institutional securities, wealth management and investment management.
What the investment banking products encompass of?
a) Trading b) Asset Management c) Underwriting Debt & Equity d) Advisory
Two traditional activities that stand at the core of investment banking?
Underwriting Debt & Equity And Advisory
What's the role of a Chinese wall?
The role of a Chinese wall is to create a barrier between different divisions (for example between Research and Underwriting) whose interactions will create a conflict of interest.
What is Capital Markets service also called?
What is Advisory service also called?
M&A and Restructuring
Equity Capital Markets
Debt Capital Markets
What's founder's interest?
The founders of a company want to sell at the right time and monetize their hard work.
What are investors looking for?
Investors are looking to invest in a company that has great management and great potential.
What's investment bankers role in the IPO process
a) Provide Guidance b) IPO preparations c) Deal with investors d) Arrange meeting with Company's management and Investors e) Stabilize the stock price
Selling additional equity share is called?
SEO - Seasoned Equity Offerings
What's an acquisition?
When a company buys another company's shares or assets.
Bidders and Sellers
Buyers and Sellers
the amount of money that the bidder wants to pay and the amount of money that the seller is asking
When is restructuring necessary?
Restructuring is necessary when the firm cannot service its debts and in danger of going bankrupt.
When the company is in need of restructuring, what are its alternatives?
A private workout or a bankruptcy procedure in the court
What's the golden goose of investment banking?
Trading & Brokerage
What is trading & brokerage consists of?
Trading & Brokerage consists of buying and selling securities by using investment bank's own money (proprietary trading) or buying securities on behalf of its clients (brokerage)
How much revenue does the trading & brokerage activity contribute in an investment bank?
It contributes about 30-50% of revenue
What's market making?
Investment banks play a very important role in the liquidity of financial markets. Market making consists of buying of securities and being ready to sell these securities when the customer place an order
What are the financial instruments do the investment banks trade?
Equity and fixed income instruments and derivative financial instruments (speculative reasons)
Examples of derivative instruments?
Forwards, Futures, Options & Swaps
What's is an Asset Manager's business?
Asset Managers are in the business of using money to make more money.
What's an Asset Management?
Asset Management is about managing clients' investment and providing them with strategies and expertise that will help them achieve their financial goals.
What is the spectrum of asset classes?
Stocks, Bonds, Commodities, Real Estate, Private Equity,
What does an asset manager do?
high quality advice and superior risk return investments
Different categories of stock?
Small Cap, Mid Cap, Large Cap, Blue Chip, Dividend Stocks, Stocks from growth region like BRIC countries
Different categories of bond?
Short maturity, long maturity, Government, Corporate
What are the other asset management categories
Commodities and Real Estate
What are alternative investments for asset management?
Private equity or hedge funds
What are the roles in asset management?
Sales force, Portfolio Manager and Research Department
Who makes the investment decision and portfolio allocation?
Portfolio manager who takes the help of Research department to make investment decisions.