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At the Imarticus Financial Analyst Program (IFAP) we spend a great deal of time analyzing the financial news. In fact, we tell our students to subscribe to the Economic Times as soon as they join. News Analysis is a key requirement of a Financial Analyst along with interpreting financial statements, valuation and financial modeling all of which is taught in the IFAP Program. Imarticus Financial Analyst course requirements can be found here.
Now back to the news! It’s been a bit of a rough week for Investment Banking. RBS is ending Investment Banking in the Middle East and Africa and significantly reducing it’s exposure in Asia. It started the process when it sold its Asia- Pacific business in 2012 to CIMB, which has also decided to cut 30% of its investment banking business. Goldman Sachs is going the same route in Singapore after posting a disappointing performance in the league tables. See More
This is its final step towards becoming a UK focused investment bank.
To make things every more depressing, market king, Warren Buffet, has gone on the offence about Investment Banking in his famous annual letter to the shareholders.
“The Street’s denizens are always ready to suspend disbelief when dubious maneuvers are used to manufacture rising per-share earnings, particularly if these acrobatics produce mergers that generate huge fees for investment bankers,” Mr. Buffett wrote.
And while what he says is true, isn’t that the case with every intermediary since time immemorial? People have been trying to color sand snow since the 17th century. Think of the Medici’s of Florence. They lent to papal monarchs to fund their legacies while gaining access, privilege and the lord’s forgiveness in the bargain. I’m fairly sure they put a premium on the goods and services and made mere copper look like gold. See More
So is there light at what has been a long and unbearable tunnel? Well Global M&A revenue of $21.0bn was up 17% on 2013 ($18.0bn), the highest since 2008 ($22.2bn). US revenue accounted for a 52% share with $11.0bn, its highest revenue since 2007 ($12.3bn). Yes, it doesn’t go unnoticed that our claim to fame is that we are slowly closing in on 2008 levels. But beggars in golden shoes can’t be choosers, can they?
– Reshma Krishnan