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THE BUSINESS OF INVESTMENT BANKS
贾 立
Who helped companies such as AT&T, GE, Intel and Yahoo to get onto Wall Street?
What is the relationship between an investment bank and stock market?
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Investment banks today also encompass securities businesses such as trading, securitilization , financial engineering, merchant banking, investment banks earn fees, commissions, and gains from principal transactions.
DEFINITIONS OF INVESTMENT BANKING
Robert Kuhn 1) Investment Banking as Everything Major Firms Do. • All Wall Street activities are encompassed here, including personal financial products and retail investments.
INTRODUCTION TO INVESTMENT BANKS
THE INSTRUMENTS OF FINANCIAL MARKET
THREE MAIN BUSINESSES OF INVESTMENT BANKS
UNDERWRITING
M&A
VC
AN INTRODUCTION TO INVESTMENT BANKS
What is the essential distinction between a commercial bank and an investment bank?
• A commercial bank is a bank that offers a full range of retail banking products and services, such as checking and saving accounts, loans ,and certain investments to individuals and business.
Lehman Brothers, declared bankrupt in September 2008. The Asian and European operations were bought by Nomura. Barclays Capital acquired the North American Lehman operations.
• An Investment Bank is a financial institution that deals with raising capital, trading in securities and managing corporate mergers and acquisitions. • Investment banks profit from companies and governments by raising money through issuing and selling securities in the capital markets (both equity and bond), as well as providing advice on transactions such as mergers and acquisitions.
• 2) Investment Banking as All Capital Market Activities. All capital raising and corporate finance functions are included, such as mergers and acquisitions (M&A), merchant banking, fund management, venture capital management, investment research, risk management and traditional underwriting of debt and equity securities.
• Bulge Bracket • • A slang term used to describe the company or companies who issued the largest amount of securities on a new issue in an underwriting syndicate, or who are the largest underwriting company or companies in the industry. The bulge bracket is usually the first group listed on the tombstone, which is an advertisement of a new issue. • • In the investment banking industry, syndicates are formed so underwriting companies can share the risks and profits associated with a new security issue with other firms. The larger the new security issue, the more firms are likely to take part in the new issue through syndication, but one firm is likely to act as the manager or comanager of the syndicate.
FUNCTION
• Investment bankers advise and assist clients with specialized industry expertise. The industry or sector grouping include Industrial, Consumer, Healthcare, Financial Institutions, Real Estate, Technology, Media and Telecommunications, and others.
• IPO(initial public offering) • A company’s first equity issue in the public markets.
DEFINITION
• Investment banks engage in public and private market transactions for corporations, governments, and investors. These transactions include mergers, acquisitions, divestitures, and the issuance of equity or debt securities, or a combination of both.
• The stock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional capital for expansion by selling shares of ownership of the company in a public market. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate.
• DEFINITION • THE BUSINESSES • HISTORY
Prior to 2007-08 Subprime Mortgage Crisis
• The five American Bulge Bracket firms on Wall Street prior to late 2008 were, from largest to smallest: Goldman Sachs, Merrill Lynch, Morgan Stanley, Lehman Brothers, and Bear Stearns. • This list shrunk to none as a result of the 2008 subprime mortgage crisis, with Bear Stearns being purchased by JPMorgan Chase, Lehman Brothers having filed for bankruptcy, Merrill Lynch being purchased by Bank of America, and Goldman Sachs and Morgan Stanley moving to become bank holding companies.
