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Investment Banking CA Notes

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84 views280 pages

Investment Banking CA Notes

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Mr Vinoth
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Investment Banking Introduction to IB and their Different Business Lines | Introduction to the Financial System | Types of Financial Markets & Different Market Participants & Regulatory Agencies | Introduction to Investment Banks - Buy Side & Sell side of Business Equity & Preference Shares- Features, Advantages and Disadvantages | Depository Receipts - Types of ADR, Advantages of ADR and GDR, Difference between ADR and GDR | Primary & Secondary Markets | Issuance/Trading | IPO Process - US & Indian Markets | Stock Exchanges & Financial Centre's of the World | Trade Economics for Equity Markets Fixed Income & Advantages of Fixed income products | Bonds and its Characteristics, Types of Bonds | Relation Between Interest Rate and Bond Price & Yield and Bond Price | Current Yield, YTM, Clean price, Dirty Price, Accrued Interest | Process of Securitization - MBS & ABS | Discussion on Credit Crisis What is FX, Features of FX | Difference Between FX & Futures | Market Participants | Types of Quotations | Type of FX Trade - Cash, Spot, ‘Tomm, NDF, Forward | Trade Economics of FX Transactions | FX Future and Options Derivatives - An Introduction | Difference between OTC & ET Derivatives | Value of Derivatives | Forwards Contracts, Futures Contract | Futures Price determination | Margins in Futures | Futures Settlement | Futures Payoffs | Definition of Options | Types of Options | Trade Economics of Options | Option Premiums | Types of Option Payoffs | Options Pricing | Styles of Exercising Options Introduction to IB and their Different Business Lines | Introduction to the Financial System | Types of Financial Markets & Different Market Participants & Regulatory Agencies | Introduction to Investment Banks - Buy Side & Sell side of Business g g “Banks” Origin and meaning “tn old age we can say any institution which is involved in money lending /money exchange is a bank.” ‘With passage of time based on needs these functions evolved into more structured forms with specialisation in various functions:- OA sresitse_in serving big (YD) Specaise in serving small Institutions like Government, businesses & individuals like you Multinational giants etc.- and me- Commercial Banks Investment Banks Basic functions of banks Ralse Capital Investment Bank Merger and Give Loans Allied services Acquisition Advisory a — | Classification of banks [—~—~—ti‘“ Sua ue ! % ——_—_, ek Te le CES Scheduled Banks Retessieeeelpac I (aSeE Tae WL:EMS Middle Market Banks) TS EY EET Pel E hee BULGE In all major All types of BRACKET "8° countries services More REGIONAL ¢.ujog¢ —-«-aparticular —-Fewerservices Very few but best BOUTIQUE region only ones Pull range of MIDDLE — Middle [pmonethan | servicesor Neither more nor MARKET —above2 multinational. «= *Petializeint / Tess more services In many regions, Full range of ELITE Parallel also specializesin _services or Few BOUTIQUE Bracket some regions than _specializein1 / “ the others more services TOP 10 INVESTMENT BANKS OFFERING FOLLOWING SERVICES Goldman Sachs: Investment- banking, | lending, management; institutional client services. JP Morgan Chase: Treasury & security, commercial banking, asset management, private banking, Ete. Citigroup: Capital market origination, markets & secutities services, treasury, é trade solutions & Citi private banking services, Etc. Bank of America Merrill Lynch: Investment banking, mortgage, trading, brokerage, Secards. Morgan Stanley: Investment é& wealth management, prime brokerage, custodian, settlement é& clearing etc. Barclays: investment banking, business retail and commercial banking and card processing. Credit Suisse: Debt & equity underwriting, M&A advisory, divestitures, prime broking, Ete. Wells Fargo: Community barking, consumer lending, and wholesale banking; and wealth management, brokerage, and retirement. Deutsche Bank: — Cross-border Payments, international trade financing, mortgage, card services, insurance, Etc. UBS Group: Wealth é& global asset management, retail é& corporate services, investment banking, Etc. TYPES OF INVESTMENT BANKING SERVICES INVESTMENT BANK isa special division of a bank or a financial institution that aids large and complex financial transactions for companies, governments, and other entities. Underwriting is a service through which investment banks raise open market capital for corporations and governments. An entity uses the underwriting service of an investment bank when it wants to launch an initial public offering (IPO) in primary market. UNDERWRITING Mergers, Acquisitions, Tender Offers, Leverage Buyouts, MERGERS & Consolidations, etc. There are two entities involved in an M&A ACQUISITIONS transaction, one is buy side co, & another sell side, Each side ADVISORS hires its own investment banks as advisors to get the maximum value for their shareholders. Facilitate buying & selling of securities & other financial instruments between investment bank & large institutional clients or high net-worth investors. Here the investment banks approach large clients to suggest profitable trading ideas who conduct & complete the trade on behalf of their client SALES, TRADING & CORPORATE BROKING ASSET MANAGEMENT SERVICES Investment banks create an efficient portfolio for their client which yields maximum returns for a certain risk that the client is ready to bear charging a commission which is a percentage of the asset under management. Most investment banks host an in-house research department where analysts work on research of equities & and other securities which helps sales & trading department to come up with high-profit trading ideas. C RESEARCH | Investment banking floors-Summary == - | ’ ES x T os GD =D =D Gx 3 L Eero aan => Ga — Geers — Investment banking floors- (1/3) les st NEES | RESEESTEED (XS Helps bunestes to buysell PXcatae cempanedipeie dont eee Ie EENIMINS PHS co —|baiaenes ee oe cae Peers 4 greet fost bone Helps companiesin fancal davessto crgante ther dbtsin IEquity Capital ‘order to estore laut or rece (Erna ete | | creme camer \_ Mipseaeteritincnnnns retvencisy | eae Investment banking floors- (2/3) 0 Ai Trading and Brokerage U Proprictary Trading “irading for Citents fae tade in stocks, bond commander of any other Do aes fr chess un HB, person funds Sani! stamens ung the enn mane wth mt em in ey mae. debt mathe dete ris rather then Cemmasions Volker Rule now probbis ams comminsionon vades inventment bnks in USA todo proprietary radng 02 Wealth Management Money management of Hs Le extte planning, etzement lasing. 4 planing. lent investment Investment Banking Floors - (3/3) Credit ‘Analyte and mate investment recommendation for corporate debt and credit deviates of issuersin vations sectors Currency Equity Analyze glob local economic RESEARCH + Analyze macro, sector and company events and their impact on currency toidentity epportunities in stock markets, rrovkets ‘Commodity Research on metas precious metals ol natural gas and agriculture + Buy side- Chents-Pemion funds, Investment fund. + Sell side-Chents-lvestment banks, advisory Furs, companies ete Mecg a & Acy visition, Mu oe Ty iS the Combination of fer Company J antity to orm Another entit Ubual ly of Syne Sein ; Sm ED ag i aw Aleyibivon as Compete When a lompany acayite Stack of another cor pany ft Can be smany, , halt of Complete take over + Ties ap Mary: > Horizontal: A—— BC Same lew! Sore industry) Wher Tyo Company, are in game industhy [Sector 2 SAME Stone Combing Together ; Ex- Fg kort K Hyntfa or Deneve Kk Motarela H To feduce (St # To Inclease market Share * To Surwving from &ompctitor ye Nertila = Tate : . A Forward oe otitel f 3 & Backward, - Blow Tato Viahy , Motey for Bx: Tata ( Same Indust Torta, | Beckuard but dierent Ieve » Sten a Longlomefate : Whey both the Corapanied ave unrelated from bath others in industty / business! ; Reason » Reagon | DivettNicaXtits f YS Kc Ekample Js pa? fe deagetierf mefgc® 9 Rel fan industfics ous, " Tetecomerun ication, tell TATA Group Barkin 7 petrochunical- 1 ($8 the Type Wore One ComPany merges fot extention oy inh business: ' M 4 ERamele.: oS Dat ( Pecdmating ton ney Eme Contine dato. Storage) Company Litibank atyifcs traveller indorance | LkT Finan te acy lres | Fidelity Ingurance Reverse Neyer ‘ Tt the type when a Smelt tompany aca wifes " {ovvsk’ f : . 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