Investment Banking

Investment Banking

Brief Excerpt from Industry Overview Chapter:

Companies in this industry underwrite, originate and maintain markets for clients issuing securities; they may also offer advisory services, help facilitate corporate mergers and other deals, or act as principals in buying or selling securities on a spread. Major companies include Goldman Sachs, JP Morgan Merrill Lynch, and Morgan Stanley (all based in the US), as well as Barclays (UK), Deutsche Bank (Germany), Macquarie Group (Australia), Nomura (Japan), and UBS Investment Bank (Switzerland).

Worldwide revenue for investment banks is about $240 billion, according to Deutsche Bank. The industry is clustered in financial hubs such as London and Hong Kong. Investment banks increasingly are engaging in deals in emerging markets such as Brazil and China.

The US investment banking industry includes about 3,000 companies with combined annual revenue of about $150 billion. High growth is forecast for the next two years. Key growth drivers include expansion into foreign and emerging markets and the creation of new product lines.

COMPETITIVE LANDSCAPE

Demand is driven by economic activity that results in company mergers, acquisitions, or public financing. The profitability of an investment bank depends on its ability to accurately assess both the value of a business transaction and the readiness of the market to buy the attendant debt or equity. Big firms have an advantage because large customer transactions require firms with substantial financial resources. Small investment banks can compete by participating in syndications and operating in regional markets or specialized industries....