Investment Banking Fundamentals

Investment Banking Fundamentals,, Investment Banking Skills, Underwriting, Mergers & Acquisitions, Sales & Trading, Equity Research, and Asset Management.

Investment Banking Fundamentals

1. Introduction:

Investment banking is a special segment of banking operation that helps individuals or organizations raise capital and provide financial consultancy services to them.

Investment banking activities include underwriting new debt and equity securities for all types of corporations.

Investment bankers help corporations, governments, and other groups plan and manage the financial aspects of large projects.

2. Investment Banking Services:


Capital raising and underwriting groups work between investors and companies that want to raise money or go public via the IPO process. This function serves the primary market or “new capital”.

Mergers & Acquisitions (M&A):

Advisory roles for both buyers and sellers of businesses, managing the M&A process from start to finish.

Sales & Trading:

Matching up buyers and sellers of securities in the secondary market. Sales and trading groups in investment banking act as agents for clients and also can trade the firm’s own capital.

Equity Research:

The equity research group research, or “coverage”, of securities helps investors make investment decisions and supports trading of stocks.

Asset Management:

Managing investments for a wide range of investors including institutions and individuals, across a wide range of investment styles.

3. Investment Banking Organizational Structure:

Investment banks are split up into three main offices- front office, middle office, and back office.

Front Office:

The revenue for an Investment Bank is generated by the front office. It consists of three primary divisions: investment banking, sales & trading, and research. The sales and trading department involves Buying and selling products. The research department comes up with various research reports on the firms or industries.

Middle Office:

The main function of the middle office is to ensure that the investment bank doesn’t engage in activities that can be detrimental to the bank’s health. It includes functions like risk management, financial control, corporate treasury, corporate strategy, and compliance. The point of contact between the front office and the middle office comes during the function of capital raising to ensure that the company is not taking on too much risk in underwriting certain securities.

Back Office:

The back office basically provides supporting activities like operations and technology to the front office so that it can do the jobs needed to make money for the investment bank.

4. Three Financial Statements

Three Financial Statements in the Investment Banking are:

1. Income statement
2. Balance sheet
3 Cash flow statement

1. Income statement

An income statement is a report that shows how much revenue a company earned over a specific time period (usually for a year or some portion of a year). An income statement also shows the costs and expenses associated with earning that revenue.

2. Balance sheet

The balance sheet displays the company’s assets, liabilities, and shareholders’ equity at a point in time. As commonly known, assets must equal liabilities plus equity. The asset section begins with cash and equivalents, which should equal the balance found at the end of the cash flow statement.

3 Cash flow statement

Cash flow statements report a company’s inflows and outflows of cash. This is important because a company needs to have enough cash on hand to pay its expenses and purchase assets. While an income statement can tell you whether a company made a profit, a cash flow statement can tell you whether the company generated cash.

5. Popular Investment Banks in India

1. Axis Bank Ltd.
2. Central Bank of India
3. HSBC Securities & Capital Markets (India) Private Ltd.
4. ICICI Securities Ltd.
5. IDBI Capital Market Services Ltd.
6. JP Morgan India Private Ltd.
7. Morgan Stanley India Co. Private Ltd.
8. Religare Capital Markets Ltd.
9. SBI Capital Markets Ltd.
10. SMC Capitals Ltd.

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